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DeRisk - Integrated trading and risk monitoring solution for a largest independent supplier of marine bunker fuels in the United States
Summary
Chemoil Corporation is the largest independent supplier of marine bunker fuels in the United States. Since it was founded in 1981, Chemoil has grown from a trader of bunker fuels to a major player in the worldwide fuel oil markets. Chemoil and its affiliates supply approximately 20% of all bunkers delivered in the United States and approximately 4% of all bunkers worldwide. Chemoil and its affiliates have not only been increasing its market share in its present locations, but is also expanding its operations in other locations. Its total trade volumes have increased significantly over a period of time. In the year 2002, Chemoil and its affiliates supplied over 4,000 vessels with more than 5 million metric tons of bunker fuel.
Challenge
The key to Chemoil’s success are exclusive sourcing, product knowledge, integrity and reliability. Chemoil previously carried out its trading and risk management using spread sheets. Criticality of providing updated trading information consistently thorough out the system and handling vast data made the existing system ineffectual. With growing operations and spread of business, the need for an automated and integrated solution was felt.
Solution
After rejecting several systems as either incomplete or too complex, Chemoil decided to implement DeRisk, a trading and risk monitoring solution offered by California software.
DeRisk provides trading and risk reporting functionality across the supply chain. It helps manage physical and derivatives trades and is intended primarily for traders and executive management.
DeRisk was customized to provide the needed functionality for adequately handling Chemoil’s trading and risk management requirements. It was integrated with the existing ERP system to enable data integrity and consistency across the company.
According to the Chemoil risk management team, DeRisk was an attractive choice because of Calsoft’s ability to continuously upgrade technology and help their customers migrate easily into tomorrow. As a strategic partner Calsoft’s expertise and understanding of the oil and energy markets (since 1992) would immensely benefit Chemoil’s operations in the bunkering industry.
With DeRisk implementation, the entire trading operations of Chemoil have been automated. Initially the Risk management team was trained to use the system and then this was passed on to other departments like trading, operations, inventory and accounting.
DeRisk provides traders a customizable screen containing all relevant information required to successfully carry out their daily activities. Traders can view market price curves, favorite deals, emails, limits and counterparty limits at a glance.
Derisk helps Chemoil automate its processes and enables it to access critical information for attaining competitive advantage in oil industry. Previously the risk management team’s time was spent mainly in data collection and analysis to generate reports for the senior management. With the new system in place, they are able to address these operational activities quickly and add value through proper analysis and risk mitigation.
Benefits
Automation:
- Capture of both physical and paper deals from a single platform
- Flexibility in Report generation
- Data Integrity and consistency across the organization
- Real time marked to market analysis
Increased System Efficiency:
- Seamless integration of Deals captured from DeRisk to existing ERP systems ensuring fast, reliable and consistent information across the organization
- Real-time data transfer in case of physical deals for effective and efficient inventory and operations management
- Remove inefficiencies in decision making through optimized deal evaluation and real time market price consideration
- Capture of both physical and paper deals from a single platform saving time and resources
Improved Risk Management:
- Capture a variety of paper deals like swaps, futures and option deals to enable better risk management
- Capture of complex pricing formula not supported in the earlier system in case of physical deals
- Effective Risk monitoring and control of trader and counterparty exposure by the risk management group
- Increased trader workability and productivity through better deal management