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IT & Data Budget 2021: The Middle Office knows

As companies in the Food and Agri trading and processing set out to upgrade their critical IT and Data Technologies, the Middle Office is getting much more attention than in the past. Why is that the case?

In a typical agricultural supply chain operation, the Middle Office function will:

1. Consume data from operational tools,

2. Enrich it with other datasets,

3. Use Business Logic to ‘make sense’ out the data,

4. Cater to the reporting needs of the Business Leadership,

5. Keep revenue producers within defined risk parameters

The function draws resources from and is in communication line with finance, accounting and IT. In effect, The Middle Office is where the value of the proprietary data is harnessed.

In our industry, the Middle Office is most exposed to the onerous cost of maintaining traditional operative models, where reporting and analysis are generated from front- and back-office systems.

1. Lack of data harmony based on differing vendor systems and data models 2. Disparate presentation approaches making cohesive interpretation across the organisation more challenging 3. Proliferation of reports, each based on their own application

Traditionally, the Middle Office processes have been powered by:

a) Spreadsheets

b) Knowledgeable People

c) Proximity

In a pre-Covid-19 world, the combination of expertise and proximity could easily compensate for the obvious drawbacks of spreadsheets, and ultimately a lack of systematic approach.

Changing circumstancing in the workplace this year have accelerated the function’s shift to a digital footprint. Business Intelligence (BI) Solutions have entered the play, helping the Middle Office mobilize the organization in terms of the push for a data-driven change and automation of cumbersome reporting processes.

Iteration is the key: in the absence of formal standards on Risk Management across our industry today, Middle Office teams across all operations have to “trial and error” their way towards the adapted solution framework.

Also important is to have definable reporting end-products. In a supply chain company, these typically include:

- structured position reports,

- near real-time revaluation of the entire book,

- overall hedge effectiveness,

- measures of the volatility of value/ cash flow,

- analysis of the vulnerability to price shocks and suppliers’/ customers’ potential to default.

Clarity on the specification coupled with an iterative approach will be instrumental to give the middle-office its due and propel organisations forward in their transformation.

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