ECOM's Soft Commodity Risk Management and VaR Automation

ECOM successfully implemented Lacima Analytics for Value-at-Risk (VaR) reporting across a diversified portfolio of physical and financial contracts in soft commodities including cotton, cocoa, and coffee.

The Project

ECOM identified the need to automate its risk measurement and reporting processes while enhancing its ability to model, monitor, and manage market risk exposure. The selected solution had to support accurate and consistent measurement of risk across physical and hedging positions—reflecting the complexities of ECOM’s operations as a global soft commodities merchant and supply chain manager.

A critical requirement was the ability to quantify basis risk and valuation exposure across multiple commodities and trading venues. This made it essential to adopt a solution with strong commodity analytics and portfolio-wide VaR calculation capabilities.

The Client

ECOM Agroindustrial Corp. Ltd (ECOM) is a global commodity merchant and supply chain management company operating in 35 countries. ECOM specialises in sourcing and trading soft commodities including coffee, cotton, and cocoa, working directly with producers and supplying major global clients such as coffee roasters, cotton textile mills, and chocolate manufacturers.

The Solution

After a comprehensive RFP process, Lacima was selected for its quantitative expertise in valuing physically-backed commodity contracts and its proven market risk reporting capabilities. Lacima Analytics was implemented in a two-phase approach.

Phase One delivered VaR capabilities tailored for soft commodity markets. Phase Two automated ECOM’s daily risk reporting processes, streamlining workflows and improving the speed and consistency of internal reporting.

The Outcome

ECOM successfully implemented Phase One of Lacima Analytics within six months. The system now enables ECOM to accurately quantify market risks—including stress testing for basis risk—across its portfolio of soft commodity contracts. This includes physically settled and financial positions in cocoa, coffee, and cotton.

In Phase Two, ECOM automated its end-to-end daily risk reporting workflow using Lacima Analytics. Reports are now generated as part of an overnight batch process, saving significant man hours and reducing operational risk.

This automation has led to saving countless man hours each day in preparing, checking and disseminating risk reports to various stakeholder groups.