‘Commodities People’, a leading events company is hosting the upcoming ‘3rd Global Commodity Risk Management Forum (ComRisk 2018) taking place 29-31 May at the Tower Hotel in London. This forum will gather thought leaders in the industry to discuss pressing issues especially the one of ‘blockchain’ which is the new buzz word in the industry.
Commodities People recently had an interesting chat with Saurabh Goyal, Chief Product Strategist at Satoshi Systems.
Here are his views on commodity trading, the financial sector, and blockchain.
Q: Could you tell us about your background in the industry?
Our company’s core experts have been in the commodity and technology business for a long time. I myself have 20 years of experience in designing, developing and running large trading applications. For the first 10 years of my professional career I developed systems for electronic trading of financial systems and for the last 10 years I have been extensively into developing CTRM (Commodity Trading and Risk Management) systems for enabling trading of physical commodities and managing the risks associated with them.
Khai Vualnam, Satoshi Systems’ COO, also has 20 years of experience in developing and running businesses in commodity procurement, trading, processing, sales & marketing and risk management. In his last corporate role, he was managing the entire west African Cocoa book for Olam International worth around 500Mil USD. Khai is a passionate advocate of emerging technologies such as blockchain and machine learning for the benefit of commodity traders
Q: What trading trends can you detect currently among your commodity client base?
We see further consolidation happening, bigger firms will get even bigger. The largest firms will get preferential treatment from large banks in the form of dedicated credit lines. Regulations like Basel III will make it even more difficult for SME commodity traders to get credit from Banks. Alternate finance will come to aid, but unless the individual alternate finance platforms can scale up using technology their cost of operations will continue to be quite high resulting in very high interest rates for SME traders. We believe that Satoshi Systems is in a good place now as our investment in emerging ‘technologies like Blockchain and Machine Learning will start paying for itself in the form of increased automation of our operations’. This will allow us to offer relatively cheaper loans to SME traders while maintaining decent returns to the lenders on our platform.
Q: You operate in both financial and commodity trading sectors. What would you say are the main differences in their approach to technological solutions (if any)? What could commodity trading sector learn from the financial sector?
Financial sector has always been on the forefront of technology and has considered it as a necessary investment. Traditionally their spend on IT is close to 7% of their revenues. Commodity traders (particularly agri and metals traders) have been laggards when it comes to usage of technology, with IT spend of less than 2% of revenues. Financial sector has also taken major initiatives in standardizing their processes, an example is major banks coming together and developing SWIFT which further accelerates the usage of IT systems across the board. Commodity supply chain and trading processes on the other hand have evolved over the years and there has been no explicit effort by competing organizations to come together and standardize processes. I think one big learning for commodity trading sector from the financial sector is that coming together and defining industry standards is a win-win situation for all of them. In the past traders have been paranoid about sharing their ‘secret and unique’ business process and data with competing firms, but ‘today emerging tech like blockchain provides them a unique opportunity to collaborate without compromising on their privacy and data’ and still retaining their competitive advantage.
Q: Next May during ComRisk, you’ll take part in the blockchain panel discussion. What would you say to those who are still sceptical about this new technology?
We understand that those who are sceptic about blockchain have good reason to feel so. An influx of blockchain related companies and ICOs has seen a lot of firms releasing tokens and raising money from the market without having any product or even an intention to create a product. However, we firmly also believe that blockchain and distributed systems are here to stay. They are not a panacea to all the world’s problems but are certainly quite fit for purpose for a good number of use cases such as supply chain management and trade finance. People who have been around can identify a bubble when they see one, we too see a bubble currently, but when it bursts the companies which are left standing are the ones to watch out for. We believe that we are one of those firms who are here for the long run and companies who partner with us will have the competitive advantage to become leaders in their respective field.
‘In many ways what we are witnessing today is very similar to the Internet craze we witnessed in 1998’ with a bust in 2000 and a gradual adoption of web technologies since then. We would like to think ourselves as the Amazon in 1998, with little or no recognition but a deep understanding of how new technology will reshape business and the perseverance to keep going through the bust period.
For more information about the interview or attending the ‘ComRisk’ Forum, simply contact Jessica Jonah at Commodities People