Geneva is considered to be one of the major hubs of world commodity trading. It is currently home to more than 400 companies who have set up their headquarters or international offices in this picturesque city. If you add service companies directly linked to this industry such as lawyers, fiduciaries and auditors, around 8,000 employees are generated in this sector.
Impressively, a third of world trade in crude oil and products takes place in Geneva. It is number one worldwide in grains and oil seeds trading and the finance of commodity trading and number one in Europe for sugar and cotton (along with London).
On a rainy evening on Wednesday 12 September, OWIT Lake Geneva and WISTA Switzerland hosted a talk at Thomson Reuters with a panel of experts from this field.
Claire Doole, Founder and Principal, ClearViewMedia moderated the event and kicked off proceedings by asking about the daily life of a commodity trader. Natacha Medina Garcia, Sugar Risk Management Marketer, Cargill, gave the audience a female insight from the front line. Natacha is very passionate about her work saying organisation is key, with a very early start to spend quality time with her 10 year old son - the most important part of her day. Starting work at 8am, she studies the market news and prepares for meetings that are central to her daily decision making process. Decisions depend on the views of the rest of the team, global supply and demand, financial structures, news headlines and more, involving copious amounts of reading for accurate information.
Ole Siig, Asset Owner and specialist in Commodities and Energy at Thomson Reuters, provided information from a trade and trade finance position. He helped explain what people pay for when they turn to Thomson Reuters for their expertise. Detailed information on fundamentals, exchange rates, shipping costs, power production and supply and demand, to name but a few, are all factors to be considered when making a decision in any part of this business such as where a mineral deposit may be, what markets are shifting and more importantly the direction they are going in.
Ole went on to suggest that Environmental, Social and Corporate Governance – ESG, is another important consideration for many in the sector today as this sets out the main areas of concern in measuring the sustainability and ethical impact of an investment in a company or business. Naturally, every company wants to optimise these benefits from farmer to trader, and investors are growing ever more interested in this area, highlighting the continued importance of its development.
Hans-Peter Egler, Head Sustainable trade, Economic Cooperation and Development, State Secretariat for Economic Affairs SECO, took this consideration further, delving a little deeper with his expertise. The use of pesticides and chemicals is monitored, often requiring the retraining of farmers to produce crops in a different way. Not all products have to be organic but they do need to be sustainable. It is essential that the right conditions are in place for produce to grow and they must meet standards as quality is the pillar product. In this respect, sustainable produce is a living data as we are learning new things every day in order to keep the system relevant.
Companies that are at the forefront of this continued advance such as Unilever and Nestle deliver products that will be sustainable in the long term and do not put one supply chain up against another, reducing the threat of competition. Reputation for a leading brand is its most valuable asset.
Alongside sustainability under the wider ethical umbrella are worker’s rights. Do these large multinational companies really care about them? Hans-Peter explained that well treated workers are more engaged and allied towards a company. Although better working conditions can be considered as an extra cost to a company, it is far better to invest in this as it can dramatically affect the quality of a product. For example in garment production: if the quality is not up to standard, this in itself would prove to be an extra cost – however if the workers have good working conditions, the final product will likely be of a higher quality.
Next up was Robert McCunn, Consultant at ARBIS LLP: Robert gave an insight into the role of law and regulatory framework in trade and trade finance. He demonstrated how complex a structure a single oil sale transaction might be. Every step of the way there are opportunities for hedging risk management including such factors as; Will the deal go through? Will the goods be shipped on time if at all and necessary payments made? Much like what Hans-Peter touched on, he again explained that it is in the interest of an investor to ensure that conditions are good and workers are sufficiently well paid to guarantee a contract for the next however many years. He stressed that a successful business should be built over a long period of time, meaning good risk management to be essential, and with such a fragile market, sustainable commodities are vital. The aim is to not maximise, but to optimise profits.
Magalie Dubosson Torbay, Professor, Geneva School of Business Administration gave an educational perspective, discussing why there is reluctance from women to become involved in trading. Finance trading has the image of being a male dominated world that women are not attracted to. This could be an ethical issue as women by nature are more concerned about the consequences of this. A few years ago one of her best students wrote her BA thesis on the ethical speculation of trading and now works for Cargill supporting the derivatives department. Many women don’t work on the front line; they work in support roles, but this can open the door for them to work on the trading floor if they have the drive and ambition to do so.
Natacha contributed to this topic suggesting that if men have 50 per cent of the skills required for a role they will go for it where as women are more likely to hold back if they don’t think they have all requirements. There are many obstacles for women – historically a male would be the first choice for a trading role, but this mind-set is now changing and it is acknowledged that females bring value and balance to a trading team. Natacha believes that you shouldn’t debate about gender and assume that women should take on certain roles; the key is to have the courage to think ‘Why not? Let’s go for it!’ a message that more females should endeavour to embrace when considering the broader trading environment.
Robert supported this with the notion that there are plenty of opportunities for women and if there was a glass ceiling for women, it has gone. He said, ‘A little bit of pressure goes a long way. You need guts to push a little and to keep pushing.’
The panel were then asked; Is Geneva going to maintain its status as a trading hub, knowing that Singapore is gaining momentum? Robert commented that if you take risk management into consideration, Switzerland is far more secure than London, Spain, Italy and Greece and it is very convenient for travelling around Europe where as Singapore is far away.
Jeremy Davis, representing GTSA and a member of the audience, contributed to this topic. He commented that international trade is active 24 hours per day spanning many global time zones, so to participate you need to bebest placed to serve both the east and the west. Asia services the east, the U.S services the west and Europe services both, resulting in a huge demand for businesses locating in central Europe. Switzerland’s political stand in the world is non-aligned, therefore people trust its impartiality and are willing to invest. Tax and banking in Geneva are also important factors – with Switzerland not being part of the Eurozone they are not in danger of being dragged down by EU taxation and the Euro currency. Singapore is certainly seen as a threat but the companies that are out there tend to be subsidiaries of companies based in Geneva.
Overall, this event provided a fascinating insight into commodity trading in the hub of Geneva. With ever changing and evolving policies being put into in place, and the endeavours of women to attempt to infiltrate into this ‘man’s world’, it is interesting to learn how this sometimes heavily criticised industry is dealing with the challenges it faces in order to advance into a more sustainable and ethically moral environment.
Author: Clare Richardson