Commodity risk management gets automated

It was very interesting to us this morning when we saw that an automated system has been developed to manage risk in commodities. This is something similar to what has been happening recently in consumer-oriented investment products. But first...

Yates Petroleum Corporation, a New Mexico-based petroleum exploration and production company, has implemented SunGard's Kiodex Risk Workbench for commodity risk management (http://www.sungard.com) and hedging. Yates is using Kiodex to produce an independent mark-to-market valuation of hedges in order to better understand and manage its exposure to volatile energy prices.

A Web-based commodity risk management solution delivered as a Software-as-a-Service* (SaaS), SunGard's Kiodex integrates trade capture, valuation models, risk measurement, financial reporting and independent market data. Kiodex's risk analysis tools, market data and Value at Risk (VaR) capabilities will help Yates to better recognize and predict margining and cash requirements from counterparties. Providing an automated, Web-based environment, Kiodex's SaaS delivery model will help Yates to simplify implementation, accelerate time-to-market, and reduce ongoing maintenance and support costs.

JB Smith, marketing manager at Yates Petroleum Corporation, said, "We chose SunGard's Kiodex to help us achieve desired rates of return on petroleum drilling and acquisition targets. Kiodex helps us to better define, execute and manage our hedging objectives, as well as to save on trade execution costs and gain improved visibility into our exposure and possible hedging alternatives."

Ben Jackson, chief operating officer of SunGard's Kiodex business unit, said, "With increased volatility in petroleum markets, companies active in energy production require a comprehensive risk tool to accurately capture price fluctuations and support decision making on their hedging programs. SunGard's Kiodex helps these organizations increase their hedging activities while managing larger exposures through greater risk controls."

*SunGard Financial Systems is pursuing a visionary initiative to transform some of the key functionality of its core systems into components to form a new software development and on-demand delivery environment called Infinity. Infinity enables financial institutions to develop and deploy custom applications, integrating SunGard components with their own proprietary or third party components. Infinity uses SunGard's Common Services Architecture (CSA), a service-oriented architecture (SOA) development framework, offering business process management (BPM) and a virtualized, software-as-a-service (SaaS) infrastructure.

We have recently been noticing how there is a proliferation of products for sale to consumers to assist them in investing in, for example, penny stocks or forex trading that are based on the artificial intelligence of computerized robots. A refer to such products as Doubling Stocks and Forex Ambush. Now it is interesting to see these programs moving into the more professional realm.