The key to data-driven trading? Building strong foundations

Today’s commodities markets are more unpredictable than ever. Geopolitical tensions, rising inflation, and the energy transition contribute to volatility, attracting new entrants such as banks and tech-focused trading players. To manage risk and find opportunities in this competitive environment, industry players turn to advanced data and AI to gain clarity in uncertain times. But before diving in, it’s crucial to lay the proper groundwork – after all, the old adage holds true: “garbage in, garbage out.”

Define your strategy

Jack Nugent, director at the commodities and tech strategic advisory firm Tradavex, highlights that before making data or tech decisions, companies need to address crucial business questions – including how much they’re willing to risk. Only then can they effectively leverage data and technology.

“One of the most challenging aspects for any trading company is deciding what you’re willing to risk. It’s often a moving target – one week, everyone’s bullish and the next, they’re cautious. Defining this, as well as how you plan on making money, is crucial before sourcing the data you need, as it will guide your approach to the problem.”  – Jack Nugent

Having internal alignment allows organisations to respond faster to market changes, which, as Umid Akhmedov, CDO at Danske Commodities, emphasises, is important for staying ahead in today’s competitive landscape.

Your competitive edge lies in your ability to make decisions quickly. The real competitive advantage goes to companies that can make their decision-making process as quick and flexible as possible. Whether it’s turning a new idea into a product or launching a fresh revenue stream, the key is to adapt and adjust swiftly. Organisations that can react the fastest to market changes will be the ones that come out on top.

Change perceptions

To build a data-centric company, Akhmedov stresses that data must be viewed as an asset. If it isn’t, your focus should be on stakeholder management to change the perception of data as a cost centre to a powerful tool for growth. 

People generally understand that data is important, but not everyone treats it as the valuable asset it is. The key for companies is to undergo a paradigm shift, changing their mindset from viewing data investments as costs to recognising them as opportunities for revenue. Once this shift occurs, data will become a powerful tool for driving growth.

Understand the ROI of innovation

We’re not going to deny the importance of ROI, but when it comes to data, things aren’t always clear-cut. As Nugent points out, while ROI isn’t guaranteed, data science has consistently delivered impressive returns across various industries – be it medicine or even sports. The key is commitment and with the right dedication, it’s very likely that your business can achieve significant results.

This thought process was seconded by Anton Bakharevski, a seasoned leader with extensive experience at major companies such as Shell, Noble Group, Genscape, Goldman Sachs, and Barclays Capital. Bakharevski explains that the biggest mistake commodities companies make is not giving technologists a seat at the leadership table.

Many COOs and CFOs, who often lack technology acumen, struggle to understand the technology investment dynamic and how ROI is realised. Yet, they are often appointed to oversee company technology. Sure, while they can recognise the value a front office developer brings by seeing the reports and new functionality created, the use of enterprise technology and a standard data mesh remains an abstract concept to them.

Looking for more insights?

Read the second edition of our eBook series: The Democratisation of Data in Commodities – Today’s Data-Driven Markets.

Featuring insights from current and former employees at: Trafigura – Danske Commodities – Vortexa – Tradavex – ChAI – Tallarium