Doug Gyani, President & Managing Director
"Change is hard"- In the commodities and energy trading market, this is the reality when it comes to the Commodity Trading and Risk Management (CTRM). In the industry, CTRM generally refers to specialized ERP and risk management software for companies involved in commodity trading. However, despite the importance of such a solution, most CTRMs today are not technologically advanced to keep up with the current pace of business. This results from a variety of different factors, including the lack of competition among vendors within the CTRM space as well as the reluctance from users to embrace new software. Even though few modern options are available in the market, the companies behind these CTRM systems lack the experience to create a solution that lends the same reliability and ease of use as their legacy counterparts. Coupled with this, software users often become attached to their current product and find it difficult to switch to an alternative. Having invested so much time to implement, integrate, and learn one system, users would prefer to use older CTRMs instead of upgrading. New systems would involve new expenses and disruption to old processes.
Leveraging over 25 years of CTRM experience, Principia Consulting is changing this scenario through complete business advisory solutions for the commodity and energy trading sectors. With industry best practices and global thought leadership that's perfected with practical application, Principia Consulting, as a global full-service consultancy, delivers customized CTRMs that maximize the efficiency of their client's workflow, and reduce risk.
Principia Consulting's core team has in-depth knowledge of the trading landscape, IT systems, business processes, and integration touchpoints. This knowledge helps them address the niche requirements of clients, without building costly bespoke solutions that can lead to delays and budget overruns. The team has been involved with several global premier trading organizations, creating a holistic suite of solutions for their clients' trading ecosystems.
First, Principia Consulting brings clarity to clients' business processes, thereby providing the visibility necessary to identify and mitigate risk. Then, the company leverages scalable solution matrices built around industry best practices that allow for nimble response time, cost-effective deployment, and optimized results. According to Doug Gyani, President & Managing Director at Principia Consulting, "We believe that knowledge and passion go hand-in-hand to create an optimal delivery platform. Knowledge alone is incomplete without the drive to make the client's goals come to fruition. Passion creates that drive. We empower all of our consultants with this mantra and strive every day to meet our clients' needs through specialized CTRM tools & consulting."
Balancing Innovation and Experience the Principia Way
From Principia Consulting's point of view, CEOs are looking to leverage years and years of data that they've accumulated from multiple systems, and invest in a single solution that provides traders/ users, better decision-making capabilities. With the digitalization of enterprises becoming an industry trend, there is a unique need among organizations—especially from companies operating in the CTRM space¬— to harness the power of data and analytics. This refers to “deep analytics,” rather than just information such as the traditional “book a deal, value a deal, risk position of the deal,” and asset position.
These analytics rely on transactional, operational, price and risk data that many clients already have, but are unable to leverage due to its disparate nature. There is no one system that holds all of the data but digital transformation can merge and leverage this data.
We believe that knowledge and passion go hand-in-hand to create an optimal delivery platform
Principia Consulting's goal is to leverage machine learning and artificial intelligence and apply their outputs in a concise and consistent manner. The company has developed AI tools that take advantage of traditional organic CTRM data, and they have pioneered the use of datasets and transactional data, which are added to ERP data, price data, and other kinds of asset-based datasets. This has resulted in better decision support tools for users, which will help them come up with optimal portfolio hedge ratios make more accurate price predictions or predict machine failure. "As much as we like to talk about analytics, deep learning, and machine learning, getting all that data into one engine to do the computation is always going to pose a challenge. There's no shortcut to it. As such, we've built central databases and repositories to bring all of this data into a single cloud or on-premise database, in addition to providing our solutions and analytical engines," adds Gyani. Principia Consulting also offers tools for tracking “rogue” accounting entries. Clients can look at those entries for detecting anomalies and solving them, which would otherwise cost a company millions of dollars in audit and reconciliation
The Tenets of a Great CTRM
Principia Consulting follows four core practices to deliver its value.
The first facet is of a consultancy, which is aimed at helping clients who already have a CRM system. Clients that don't have a CRM system often follow a go-to vendor strategy wherein, Principia Consulting helps them define their requirements to get the best solution. The company assists clients in identifying a short and very finite list of vendors that potentially fit their needs, drive through the RFI, RFP, RFQ processes, and select a vendor. In its entirety, this consultation is a ten-week, turnkey operation. This offering is not unique to Principia Consulting as a boutique CTRM service but the fact that Principia Consulting offers their “Go To Market” system selection program at little to no cost is revolutionary. “The budgets set forth by companies to procure and implement CTRM solutions shouldn’t get eroded away with bloated selection projects, we believe the value to the client is in picking the right system and implementing that system in the most optimal manner. I prefer our clients reserve their budgets for their vision and allow us to show them the path to that vision.”*Terms & Conditions Apply
Principia Consulting understands the core -- the types of trades, commodities, curves, and functional risk requirements within their purview. The company starts the process by leveraging best practices and their substantial knowledge base and adds customer's specific requirements that are driven through business processes. It's not just how their trading works or how the risk works. It's understanding all of the touchpoints and the bidirectional movement of workflows and processes and documenting them. This defines Principia Consulting's second core tenet - knowledge and best practices.
The company understands the business and business processes. However, because Principia Consulting is hired primarily to bring in corporate performance management (CPM) system/technology, they understand that business processes can and should change. There's no sense implementing a brand new system if clients are going to keep the same old business processes, which would diminish the efficiency and the value proposition that a CPM system brings.
Principia Consulting prepares its customers for the change in business processes, automation, and the efficiency a digital transformation brings. Then, as the CTRM system comes in, Principia Consulting will start to develop the processes. After this, the only thing left to do is to pick out a solution provider from the shortlisted vendors. Interestingly, instead of starting with ten different vendors, Principia Consulting typically begins with three or four and very quickly goes down to the top two.
“ We've built central databases and repositories to bring all the data into a single cloud or on-premise database, in addition to providing our solutions and analytical engines”
The third facet is all about leveraging relationships. Having been at Openlink Financial for 15 years and in the business for 25 years, Principia Consulting's contacts within the CTRM market go very deep. So, when Principia Consulting makes a call or negotiates for the benefit of a client, they are doing that with key decision-makers in the company—the selection advisory. Now, if a client only has a system, then Principia Consulting acts as a transformation advisory focused on optimizing the existing system. In such cases, Principia Consulting looks at the system, examines it, and identifies ways to optimize the system and take advantage of its core competency— either re-implementing or upgrading the CTRM system to get the maximum efficiency out of it.
Now, if that doesn't work, Principia Consulting employs what they call “bridge solutions,” which manages the entire SDLC process from design, build, and testing through the deployment and training process. Here, Principia Consulting develops interfaces, integration, or standalone tools that sit around the periphery of a CTRM system to make it more powerful or to augment some of the gaps inside that system. This includes things like operational modules, advanced risks, VAR and PFE engines, BI tools, and ERP systems. Above all of that would sit the reporting dashboards along with their AI and machine learning capabilities.
The final tenet is risk management. Principia Consulting assesses risk curves that define curve topographies, optimize clients' risk policy, and enforce that risk policy, trader limits risk limits, stop loss limits, VaRlimits, and portfolio limits. The company will then move their PFE and advanced risk tools and advising to pick methodologies that will best fit the client's needs and their technologies.
Toward the Future of Commodities Trading
With its headquarters in Singapore, Principia Consulting enjoys a fair market presence overseas, with clients in Europe and the U.S. markets. For the future, the company is focused on organic growth, recognizing that a consulting company's best asset is the people that make it up. "By ensuring that we give our clients the time and tools to develop their skills, we help them share experiences and share knowledge. So, we will build our team organically, holistically, and continue to grow by just doing a great job for our customers," concludes Gyani.