Alvaro Mariani, Senior Risk Advisor at TRADESPARENT, with many years of experience in the commodity risk industry, talks about the truth behind daily reporting in Agri-commodities. It is not all sunshine and rainbows!
Spoil alert to millennials! The following article contains 80's cinematography references! For you and others that may need a refresh, here is a clip (https://www.youtube.com/watch?v=hZZhhA87d6g).
I always find this clip fun to watch but it may also bring some painful memories. Nostalgia of that fake blood aside, 902 reminds me of the years I spent trying to over engineer daily reporting down to a fully mechanical process. It should be a push of a button! Let’s eliminate Microsoft excel completely!
Ok, granted. That wasn’t also the only pain. Pushing the limits of what can be automated often does pay off in a big way. It is highly instructive to watch the demystification of processes that previously required endless meetings and/or long strings of emails. Automation of daily PnL decomposition is probably my favorite example. It is a bit like magic having an accounting-data-based daily report on how much was made or lost if only market changes were applied and everything else was kept equal: no impact from execution, no changes in accruals. Moreover, the drill down to non-market related changes to the lowest level of detail with a couple of clicks.
But let’s be honest. There are good and bad days. In the good days 2/3 of your PnL could be explained in a straight forward way and 1/3 required you to do some digging. In the bad days, it was the other way around. How many bad or good days you are going to have depends on many things, many out of your control. But in any case, it is never 100 pct. The human factor is always in the process.
I am from a generation of commodity risk people that took banks and energy markets as the golden benchmark on how processes around data are to be standardized and automated. In retrospect, I not only think we could have taken the benchmark with some more grains of salt (https://baselinescenario.com/2013/02/09/the-importance-of-excel/) but most importantly, we perhaps confused the notion that discipline had to be added to the process with the idea that human interference was always bad.
Today, I believe more than ever that yes, copy/pasting is the enemy. That is just stuff that computers do better. On the other hand, one of the reasons excel is so pervasive is because it let’s you incorporate information that is just not in the data. So, systems should get smarter and allow for the right human input at the right time, instead of forcing the user to bring it all to a spreadsheet and fix it.
Carefully designing this half-human, half-machine is the key of getting reports right in daily basis. Call it a RoboCop!
More information on automated data management and how to create a timely and accurate PnL reports within clicks? Visit www.tradesparent.com or sign up to our product demo here: https://www.tradesparent.com/demo
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