View non-flash version
46 Maritime Professional 2Q 2011 trading departments while mitigating risk. IMOS compiles a unified view of the company’s physical and paper freight positions. Evangelos Efstathiou, Director, Trading & Risk Management at Veson Nautical, explains, “In IMOS, every deal is a contract. You define the contract, duration, the counterparty, the face value of the deal you’ve entered into. Maybe you’ve got three months of exposure where you’ve agreed to a par- ticular rate. You can even drill down and see the P&L calculation: how much are we in or out of the money? That ability to roll it all up by strategy or line of business is a pretty powerful tool.” THE ULTIMATE MISTAKE: USING YESTERDAY’S TECH TO TRADE FFAS TODAY Listening to industry, Veson discov- ered that organizations were looking to move away from a defensive risk pos- ture and into a position of active control of their FFA portfolio. FFAs are one of the fastest growing areas within com- mercial shipping industry for many rea- son reasons. Spot traders, for example, often find themselves in need of liquid instruments offering protection against uncertainty and volatility. FFAs can also assist to mitigate counterparty risk exposure. Absent a robust system to facilitate FFA operations, however, many outfits still rely on spreadsheets that do not link to accounting or front-office func- tions. Still others spend inordinate amounts of time creating and manually updating standalone spreadsheets with market data. That’s a mistake, insists Veson’s Efstathiou. In fact, FFA operations as practiced today can be time consuming and inef- ficient. “People need to be able to quan- tify their exposure. Companies have risk in their commercial contracts, time and voyage charters. We often see com- panies managing these things in spread- sheets which are prone to manual error and not updated on a timely, automatic basis. So, if I’m in late tomorrow morn- ing because my daughter is sick, then the boss doesn’t have the latest Baltic data. What this creates is a lack of transparency around our exposure and access to real time information. The value of having data in real time is tremendous.” MEASURABLE METRICS The challenge of compiling a unified view of the company’s physical and paper freight positions cannot be under- estimated. Without this consolidated view, the company actually strips itself from most benefits that FFAs offer. Left with isolated islands of data, the end result is a failure to neither assess mar- gins on volatile freight rates nor utilize SOFTWARE SOLUTIONS TABLE A Veson Requirements Checklist • Manage wet and dry FFAs as well as options • Automatically download market information from Baltic Exchange, Imarex and other sources • Generate interactive exposure report of overall cargo, TC and Freight derivatives position • Consolidate long/short position with mark-to-market capabilities • Track credit levels and monitor exposure to Counterparties • Deliver batched positions: one unified view of P&L on several trades simultaneously • Automate the processing of invoices and integrate with corporate accounting • Security, audit and alert tools “People can tell you what their market view is. Very few of them can actually quantify that market view. With IMOS, you can do that.” + Evangelos Efstathiou Director, Trading & Risk Management
