In its latest industry analysis, Chartis Research doesn’t mince words: The commodity sector’s operational risks aren’t just inefficiencies, they’re structural vulnerabilities. And in today’s volatile environment, those weaknesses can quickly become liabilities that threaten profitability, compliance, and credit exposure.
At ClearDox, we’ve long seen these risks play out firsthand. So, while the Chartis report may be eye-opening to some, for operations leaders in commodities, it’s more like a long-overdue mirror.
As Rick Nelson, our CEO, put it during a recent conversation:
“The industry has always known operational risk is there. The problem has been seeing it clearly — and making sense of it at scale.”
Chartis helped define the true scale and downstream implications, giving the industry a clearer view of the risk we’ve long suspected was there.
The Crux: Complexity + Manual Work = Embedded Risk
Commodities trading is uniquely exposed to operational gaps due to the nature of its contracts, physical logistics, and global regulatory overlap. Chartis breaks this down clearly: compared to traditional financial markets, commodities are saddled with more diverse asset classes, less standardized processes, and far more paperwork.
Energy traders are especially challenged with highly complex, long-term contracts. Agricultural traders wrestle with enormous volumes of inventory and movement data, with seasonal spikes. Both face inconsistent documentation formats across counterparties and jurisdictions.
And all of it — contracts, invoices, quality reports, shipping records — is still overwhelmingly processed manually.
As Rick notes:
“It’s not just the complexity. It’s the fact that the industry still lacks the infrastructure to normalize the data. Risk hides in these gaps and inconsistencies.”
Hidden Doesn’t Mean Harmless
One of the strongest insights in the Chartis report is how operational risk bleeds into market and credit risk — often silently. A missed clause in a contract. A duplicated trade. A misrouted shipment. Each of these may seem minor in isolation.
But they accumulate.
“The real cost of operational risk shows up downstream — when gaps in documentation, timing, or contract terms distort decision-making and impact P&L,” says Rick. “Earlier action minimizes the harm, but it’s hard to fix what you can’t see.”
Firms hedge based on inaccurate inventory, reconcile invoices late, or miss compliance issues until long after regulatory deadlines have passed. These aren’t edge cases. They’re systemic symptoms of processes that haven’t kept pace with the speed and complexity of today’s trading lifecycle.
Why Is the Back Office Still Stuck?
Commodities firms want to manage and mitigate risk. However, with operational risk they’ve lacked the time, tech and headcount to do more than keep up. This is an historic cost of doing business that no longer needs to be tolerated.
Front offices have been equipped with powerful ETRM systems, real-time analytics, and risk tools. But middle and back-office teams? Often still reconciling PDFs against spreadsheets. Sometimes even faxes.
That creates a strategic blind spot.
“Digital transformation has reached the front office,” said ClearDox CTO Mark Lefebvre during CTW Americas. “But most firms haven’t extended that mindset to the back. And that’s where the operational risk lives.”
Turning a Cost Center Into a Strategic Priority
The Chartis report isn’t just a wake-up call. It’s a plea to rethink what operational excellence should look like. It argues that AI-powered operational risk analysis and automated mitigations are no longer “nice to haves” — they’re prerequisites for staying competitive, compliant, and profitable.
That shift is already underway.
In one case, Freepoint Commodities — faced with increasing transaction volume in their trucking operations — reduced reconciliation time by over 75% by automating their review and validation processes. What used to take 75 hours per week now takes a fraction of that time — and delivers far more reliable results.
“We used to have 20-day close cycles,” said Tim Cannon, Global Head of Operations at Freepoint Commodities. “Now we’re closing books by the fifth or sixth business day.”
A Final Thought for Operational Leaders
Operational risk in commodities has always existed. What’s changed is our ability to see it — and do something about it.
“Illuminating operational risk doesn’t just reduce cost,” Rick says. “It unlocks capacity. It frees firms to scale without increasing exposure. That’s where the opportunity lies.”
If you haven’t yet read the full Chartis report, start there — not as a critique of your current state, but as a benchmark for where the industry is headed. Then, go further by exploring how firms like Freepoint are already putting these insights into practice.
Don’t Just Take Our Word for It
The Chartis report and firms like Freepoint offer clear evidence that reducing operational risk is possible—and already happening. If you’re curious how similar changes could impact your organization, we’re happy to share what’s worked across the industry.
