Energy technology firm of the year: CubeLogic

Energy Risk Awards 2021: Commodities software firm posts impressive growth for its market, credit and compliance risk platforms

Lee Campbell, CubeLogic

In a year that sent unprecedented demand shocks and price volatility around the commodities complex, many firms struggled to identify and manage their risk exposures.

Step forward CubeLogic, a cloud-based software firm whose business intelligence tools are designed specifically to enable commodity firms to monitor, manage and mitigate exposures to market, credit and compliance risk. In 2020, the firm carried out 18 go-lives of its applications, launched a new position limits product, added increased real-time visualisation to its market risk platform, expanded staffing by 23% and turned its support and security services into a 24-hour operation. It also registered a whopping 48% increase in revenue. 

The firm now has well over 100 full-time personnel in offices in London, Houston, Bangalore and Berlin, serving mainly tier one commodity firms. It recently opened a new office in Swansea, UK, to carry out research and development work around analytics and machine learning.

A big differentiator for CubeLogic is the standard of its data and cyber security, says Lee Campbell, the firm’s founder and chief executive. As well as a 24/7 real-time monitoring team, the firm has regular vulnerability assessment and penetration testing internally and externally, all of which meet the stringent standards of external certification programmes ISO and SOC.  

The firm’s credit platform – which has a web-based front-end and the flexibility to do, for example, calculations on the fly – remains its core offering, but its other products are taking off too. “Credit is still the biggest product within the suite, but we’re seeing a lot of traction on trade surveillance, on position limits and on market risk now,” says Campbell.

In February, CubeLogic launched its real-time position limits monitoring product. The software takes in exchange and regulatory limits, and alerts firms before they cross any thresholds.

“It’s very difficult for companies to do this themselves,” says Campbell. “They can overstep limits without realising. It’s not just about outright volumes but the nature of the trading too, for example, whether trading is hedging or speculation. There are cross-exchange limits as well that our system takes into account.”

The CubeLogic software pulls in not only reference data like the exchange’s own limits, but transactional data to give a full picture of a firm’s position. The different data feeds are then aggregated so the calculations can be made.

“The data is often in different units and measures, which all need to be standardised,” says Campbell. “There’s a lot of complexity and rules around, for example, how you calculate netting and stepdown rules for spot.”

CubeLogic’s trade surveillance platform is another core offering that benefits from the firm’s specialist commodity experience. “There’s a lot of nuances and complexities in physical trading that may not be well understood by financial services software,” says Campbell. “We are strong in that area.”

Additionally, CubeLogic has added machine learning to the trade surveillance engine that over time will cut down on the number of false positives. “The system improves as you use it,” says Campbell.

In order to carry out its ambitious growth programme, CubeLogic entered an external investment deal in June 2020 with Growth Capital Partners, which became a minority partner.

Looking ahead, the firm is focusing on the energy transition, adding capability around carbon and transition risk. “Traditional ways of assessing the credit or market risk of companies is changing as the world transitions to the low carbon economy,” says Campbell. “It’s no longer sufficient to look only at balance sheets and management structure, you also need to look at things such as corporate behaviour and ESG (environmental, social and governance) strategy.”  

More than ever, the impact a firm has on the environment drives sentiment and affects creditworthiness and, ultimately, long-term profitability. CubeLogic has also built a sentiment analysis tool that takes feeds from news sites and social media to scan for events that might impact share prices.

Tools also consider physical climate risk, taking into account where a firm’s physical assets are and the risk of damage from events such as floods, fires and hurricanes. “We factor all these things into longer-term scoring models,” says Campbell.

Visualisation tools that allow users to look at risk concentrations – for example, by sector or geography – can now also show the make-up of a portfolio in terms of its green credentials.

“Boards will ask these questions,” says Campbell. “We’re really happy to be able to help the transition by providing these answers.”