Stable launches commodity price risk management platform
Posted: 6 March 2019 | Source: Finextra
Stable, the venture backed fintech that is rapidly disrupting the commodity price risk management (CPRM) industry, today announces the launch of its risk management platform.
The new platform is initially focused on food and farming businesses in over 15 countries around the world. Stable has raised $6m in seed funding from Anthemis, Syngenta Ventures, Baloise and Ascot Underwriting.
Price volatility is a major risk to sellers and buyers, yet the current financial tools to deal with price risk are currently designed for financiers, rather than farmers. Farmers require a minimum of 2000 acres to justify a Futures account, but less than 1% of the world’s 500 million farmers farm over 250 acres. Just 10 of the world’s top 200 crops are traded on an exchange and these forgotten crops are where Stable operates, as it works to make ‘hedging’ accessible and simple.
Stable’s data science platform prices the risk and manages the portfolio on behalf of its global capital providers, including insurers and other capital markets, who provide the liquidity and risk capital required. The design of Stable’s algorithms was inspired by the writer A. G. Street’s phrase ‘Up Horn, Down Corn.’ The algorithms are designed to mimic traditional mixed farming as they spread the risk across a wide variety of niche commodities, in many different countries.
This new approach to price risk management is made possible by recent advances in data science and the reduced cost of computational power. Stable’s platform runs 62 trillion simulations a month across the commodity portfolio, adjusting the risk capital in real-time across hundreds of niche commodity indexes.
Stable is a Lloyd’s of London Coverholder and is registered in the UK as an insurance intermediary by the FCA. Unlike derivatives, Stable only protects a real risk to a business rather than facilitating speculation. Farms cannot protect more than they produce and food buyers cannot protect more than they purchase in the normal course of business.
Ruth Foxe Blader, Managing Director of Anthemis said: “Stable are tackling a huge problem for a very crucial market in a way we have not seen before - which is incredibly exciting. Sitting at the intersection of agriculture, finance and technology, the team are disrupting a multi-trillion dollar industry to give stability where volatility clouds the market. Timely, critical and innovative. As investors, we are pleased to back Richard and his team and look forward to supporting them in their journey.”
Richard Counsell, CEO at Stable commented: “Stable’s price risk management platform is the result of over three years of R&D by our world-class team of data scientists and academics. We’re bringing a fintech mentality to the price risk management industry and our current soft commodity indexes will shortly be joined by niche industrial and energy products.”