Eric Boudier on Commodity Trading and Risk Management
BCG’s Eric Boudier discusses the importance of commodity trading and risk management.
BCG helps clients manage commodity risk in order to minimize exposure and create value. Our comprehensive offering supports the entire commodities ecosystem, including commercial and trading strategies, operations and IT implementation, and more.
The ongoing energy transition, coupled with shortages from traditional energy sources has led to an era of super volatility. It could be the start of a golden age for commodities markets—if companies can manage the risks. BCG helps energy, industrial, and other clients understand and limit their commodity market risk exposure.
We partner with the entire ecosystem of commodities and trading players. Originating in BCG’s energy consulting work, our commodity risk management and trading risk client work has expanded from utilities and oil and gas producers to metals and mining operations, agribusiness, and other industrials. We also assist merchant traders and banks as well as commodities exchanges, brokers, data providers, and government agencies.
Our global team of experienced trading risk consultants helps commodities traders in each of those industries capitalize on market conditions to create value through updated strategies, operating models, portfolios, IT systems, and more. Our approach includes:
Utilities have been severely impacted by dramatically elevated market volatility in European gas and power prices. For a leading utility, BCG identified >€5B of reduced liquidity exposure through a rebalanced gas and power portfolio. We simulated and defined an adjusted hedging strategy, recalibrating the triangle of market, credit, and liquidity risk, and improved financing structures to significantly improve working capital.
Oil and gas companies often offer customers volumetric flexibility to account for unexpected operational downtime on the off-taker side. The market price spread between contract and spot price put an oil and gas client at risk when customers began commercially using the optionality. We built an integrated portfolio valuation tool to price the provided optionality against market price scenarios, realizing $200M p.a. of top line improvement.
In response to rapidly changing concentrate and metals markets, BCG worked with a leading global mining company to build a transformation roadmap for their commercial function in base metals. Together with the client’s marketing and trading team, we identified a range of uplift potentials with a conservative value uplift of $150M, and established a new operating model for the company.
Deep roots in the commodities industry and a long, fruitful track record guarantee that BCG commodity risk consultants speak the same language as folks on trading floors. Our consultants’ knowledge and experience are supported by regular BCG commodities industry benchmarking that dates back to 2006. The benchmarking series provides deep dives into key trends of the day, allowing us to spot emerging markets and share guidance on how to adjust business models and manage future scenarios in order to minimize trading risk.
BCG’s Eric Boudier discusses the importance of commodity trading and risk management.
BCG’s Antti Belt gives insight on how traditional leaders can combat new digital players encroaching on their turf by thinking how they want to compete, which small digital projects they can launch, and scaling their best projects fast.
A global survey of climate and sustainability executives reveals that the demand for quality emissions credits continues to grow.
Our sizable trading risk consultant team has noteworthy experience across a broad spectrum of commodities and geographic regions, plus deep connections with industrial clients. Team members include several former energy and energy commodity exchange CEOs as well as traders and risk managers. We’re one of only a few firms with an IT staff dedicated to implementing trading and risk management systems.