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Wednesday, November 13, 2013

Many businesses will not survive the 3D Printing revolution – start adapting now!

So-called 3D Printing describes the manufacture of a three dimensional object from raw material inputs by a machine, as directed by a design program. That is without the intervention of human labour, except to set up the machine and ensure the raw material is supplied.

The term is used because the operation is similar to the type of printing with which we are familiar. To print a document (a two dimensional product) we set up a machine (printer) with paper and ink, and then send it a computer generated program (software code) based on a document we have designed on-screen. The result is a physical output produced from a design input, albeit in two dimensions. 3D Printing works on the same principle.

The future is already here — it's just not very evenly distributed. (William Ford Gibson)

By way of a quick introduction to this aspect of the future please view the concluding three minutes of the BBC Hard Talk interview with Ms Fu Ping via this link….

Ping Fu: 3D Printing is 'as big as the internet'

In the linked article Arnold Geelhoed discusses what 3D Printing will mean for some of the industries likely to be affected. His comments should alert Credit Executives everywhere to the significant implications this disruptive technology will have for credit risk assessment.

The article is made available with the kind permission of the National Association of Credit Management (NACM), via this link:

The industries that Mr Geelhoed highlights in the article are listed below with a brief paraphrase of his comments under each heading.

Transport and Packaging:
When printing (manufacturing) products at home or at a nearby specialised facility becomes commonplace, the packaging and transportation of many finished products will no longer be required. Only the bulk delivery of raw materials, such as chemicals or metals, will be required.

Waste Processing and Disposal:
Production of product that is subsequently not purchased will be avoided; hence fewer wasted finished products will be produced. Used and discarded printed products will be easily recycled to provide raw material for new product to be printed.

Retail and Distribution:
Product designs will be produced and made available through on-line outlets such as Amazon, to be downloaded directly into the printer and manufactured immediately. Therefore the wholesale distribution and retail sectors will be seriously negatively affected; a large portion will disappear.

The demand for warehouse space will shrink dramatically.

Massive job losses will be incurred, vast quantities of machinery will be idled, and many hectares of manufacturing building and real estate will lie fallow or have to be redeployed.

Marketing and Advertising:
Designers will advertise direct to the consumer via the internet.

Designers, Chemists and Nano-Technologists:
Creators, innovators and engineers will be ‘the new heroes’ (as Mr Geelhoed describes) providing the designs and the materials required to make 3D Printing (local manufacturing of single items) a cost effective and practical reality for many millions of people. The branch of Nano-Technology that is referred to here is that which involves the creation of new materials by manipulating the atomic structure of existing substances, such as carbon.

Mr Geelhoed concludes:

“I believe that this new technology is going to dramatically change the world in many and varied ways. It could mean a cleaner environment, due to less fuel required to transport goods …, as well as less waste from packaging. ….whole chains between manufacturer and consumer will disappear.

Working in credit management will be very exciting, challenging and will require a lot of adjustment in order to monitor the new risks…”

A brief survey of other 3D Printing developments indicates that the implications are much more widespread. Other industries will be affected; employment patterns will be significantly disrupted even in the construction sector. Please view the 12 minute linked presentation to learn about machines being developed to manufacture homes in 20 hours without the need for plumbers, electricians, bricklayers, stonemasons and general low skilled labourers.

3D Printer can build a house in 20 hours

The following article published by the Mail Online is also relevant:

3D Printed Room looks like the beautiful interior of a Cathedral

These reports may also be of interest:

‘US space agency NASA announces it will launch a 3D Printer into space next year to test the feasibility of making spare parts in zero-gravity.’ BBC News – Technology Report on September 30, 2013:

NASA plans first 3D Printer space launch in 2014

Bastian Schaefer: A 3D-Printed jumbo jet? (six minutes)

To conclude on a lighter note, watch this video presentation:

3D Food Printer Will Start with Pizza (three minutes)


Tuesday, November 12, 2013

The Oman and Brent Crude Oil Markets explained


A new article titled “DME Oman Crude Oil Futures (OQD)” that clearly identifies the credit risks involved and covers all important points related to this market, has been posted on, see:

The Dubai Mercantile Exchange’s OQD contract is becoming the crude oil pricing benchmark for the Asian market, displacing the Dubai Crude Oil Futures contract. It is important to understand the credit risk implications of trading in these and the associated OTC Oman Crude Oil Contracts.


An updated article titled “25 Day BFOEs - Understanding the related Credit Risk” that clearly identifies the credit risks involved and covers all important points related to this market, has been posted on, see:

ICE Brent Crude Futures and 25 Day BFOE (Brent-Forties-Oseberg-Ekofisk) Forward contracts create the basis for the determination of the cost of more than 65% of the crude oil bought and sold in the world. However the jargon and processes related to the wider Brent Futures and BFOE market are not easy to unravel. Understanding the credit risk implications is even more challenging. This article clearly covers all important points.


Thursday, October 31, 2013

There is a naïve belief that mathematical models can foretell future risks…

The article titled “Well Short of Model Behaviour” written by Brandon Davies (CEO of and published in the October 2013 edition of Financial World ( provides an excellent description of the development and abject failure of financial risk modelling, as currently practiced. Reading the article is highly recommended.

Mr Davies’ perceptive conclusion is quoted here to pique your interest:

‘There seems to be a naïve belief, often encouraged by risk professionals, that models are a modern crystal ball. They are not. Models can, and do, bring greater insight into risk and its management but, whatever their sophistication, they are simply guides to action – not a substitute for individual expertise or collective responsibility.

Risk management should be based on expertise informed by a variety of models. Whether this fits with the current risk governance process within banks is, however, questionable. Boards, in general, do not understand the limitations of the financial models. It is, therefore, not only the models that need changing; it is also the governance structure in which they sit.’

The GCMG Blog of August 15, 2013 “Complex Systems such as ‘Economic Risk’ demand a new approach to potential modelling”, and the Blog posted on April 22, 2012 “The Art of Predicting Failure” also touch on this subject but from different perspectives.


Thursday, August 15, 2013

Complex Systems such as ‘economic risk’ demand a new approach to potential modelling?

“Many people in various fields tend to follow the Young method. If they are studying economics, or the human body and health, or the workings of the brain, they tend to work with abstractions and simplifications, reducing highly complex and interactive problems into modules, formulas, tidy statistics, and isolated organs that can be dissected. This approach can yield a partial picture of reality, much in the way that dissecting a corpse can tell you some things about the human body. But with these simplifications the living, breathing element is missing. You want to follow instead the Champollion model. You are not in a hurry. You prefer the holistic approach. You look at the object of study from as many angles as possible, giving your thoughts added dimensions. You assume that the parts of any whole interact with one another and cannot be completely separated. In your mind, you get as close to the complicated truth and reality of your object of study as possible. In the process, great mysteries will unravel themselves before your eyes.”

This quotation from the book ‘Mastery’ written by Robert Greene, addresses the limitations of the formulaic, mathematics based approach to studying what are now called ‘Complex Systems’.

Complex Systems are systems that operate on the basis of so many random variables that they cannot be successfully expressed within mathematical models. You will find a fascinating explanation of Complex Systems, and the technique recently developed in order to understand them, on the TED website – - in a presentation by James B Glattfelder, titled ‘Who Controls the World?’

The global economy is a Complex System since it is created and influenced by the actions and decisions of billions of global citizens. Each action and decision is potentially a random variable.

Credit risk, particularly Probability of Default, is a Complex System as it is impacted by many variables both within a business entity and external to a business. That is the reason why Probability of Default has not been successfully modelled at the enterprise level.

Statistically derived Probability of Default does have a use at the portfolio level – provided the potential failure of one customer or supplier is a sufficiently small portion of the whole portfolio so as to be survivable. In other words, provided the portfolio is large enough and diverse enough.

This supports the contention that credit risk at the enterprise level should not be managed on the basis of Probability of Default, as derived from a mathematical model. It should rather be based on a holistic assessment of the forces shaping the future viability of the enterprise, and therefore on the practical probability that it will pay or fail to pay its debts in full and on time.


Sunday, May 26, 2013

'Credit Risk Management - The Novel’ an ePUB version is now available

Now available in .pdf and .ePUB versions for £3.18 each; ePUB is designed for use with eBook Readers and Mobile Devices.

This is a new concept in business books, which is ‘difficult to put down’…

"It's a great idea to dramatise a subject like credit risk. I hope this becomes a trendsetter..." (Reader Comment)

The reader is drawn into an historical fiction that is interwoven with the day to day challenges of a credit risk management team. There are interesting twists and turns, characters are developed, fascinating places are visited, and little known facts emerge.

There are case studies galore that you will hardly notice but will remember, and will no doubt apply when appropriate.

See more details on:

In order to purchase a pdf or ePUB copy, click this link to eStore T3P:

Pdf and/or ePUB copies are also available from Google eBooks and other online retailers; search by Title or ISBN 978-0-9576279-0-1.

A Kindle version is available on and all other Amazon websites; i.e. India, UK, Germany, Italy, France, Spain, Australia, Korea, Japan and Brazil.


Saturday, April 20, 2013

‘Credit Risk Management - The Novel - Part One’ has been published by T3P LIMITED

I am excited to announce that my new book has now been published as an eBook.

It is available through the T3P LIMITED website currently. Within ten days it will also be available through Google eBooks and then distributed to other online retailers.

I am hoping to attract young business graduates to the credit profession as well as provide them with a little credit risk management education and entertainment.

I have arranged a 45% coupon discount for all GCMG readers; see below for details of this offer.


Credit Risk Management - The Novel – Part One
ISBN: 978-0-9576279-0-1

This is the first narrative non-fiction novel to feature the true to life experiences of a team of professionals managing business to business credit risk, day to day. This creative and personally satisfying endeavour is set within the context of the largely untold story of the inexorable progress the human race is making towards achieving world peace.

James and his colleague Jenny mask his endeavours on behalf of peace by managing the credit risk for a global enterprise. In so doing they pass on their accumulated experience and knowledge to fellow team members and the reader.


If you wish to purchase a copy taking advantage of the discount, please do so before April 30, 2013.

Simply log onto the store link below, click the relevant ‘Add to basket’ button, choose your country, enter the coupon code GCMGCRM, and then proceed to pay via PayPal the revised discounted price. You will subsequently find a download link when you revert to the Roman Cart page.

Please recommend the book to those of your friends and colleagues who may find it interesting.

Anyone wishing to purchase a copy should log on to the store at:

The recommended price is GBP 3.18, USD 4.88, EUR 3.78, or the local currency equivalent. Payment is through PayPal using a PayPal account or credit card.

A Kindle version will be made available on within 10 days.

I hope you find the book an enjoyable read.

I will start writing Part Two when I complete the initial publication and promotion activity for this book.

Ron Wells

Sunday, April 7, 2013

Why is Brent Crude Oil more expensive than West Texas Intermediate (WTI) Crude?

The USA is maintaining its ban on the export of crude oil, which depresses the price of WTI (West Texas Intermediate blend) as domestic plus Canadian supplies exceed demand, thus creating the WTI – Brent differential, now around $14 per bbl. However export of refined product is allowed. The result is US refiners are expanding while the European refining complex is in dire financial straits, and the future of Asian refiners is threatened….

Standard Chartered Bank Research refers, as this extract illustrates:

“Valero’s 4Q12 profit jumps 20x YoY, benefiting from cheaper crude. Valero Energy Corp (VLO US, NR) reported a 20x jump in its 4Q12 net profit to USD 1.01bn on 29 January 2013. This was mainly driven by higher refining margins from processing cheaper US crude. WTI, the US crude benchmark, was at a discount of c. USD 22/bbl to Brent in 4Q12. Valero also disclosed plan to ship additional cheaper crude via rail and barges to its refineries on the US Gulf Coast, until the Keystone XL pipeline becomes operational

Valero looking to increase product exports: Valero said it exported 110k bpd of gasoline in 4Q12, up 70% from the normalised level of 60-70k bpd. The company said it has a gasoline export capacity of 225k bpd, which it seeks to capitalise. It also disclosed plans to increase diesel export capacity to over 400k bpd from 280k bpd currently”

It is also public knowledge that Canada’s Nexen plans to avoid the US blockade on crude exports by railing crude to Canada’s West coast, for export to China, which will cause the WTI-Brent arbitrage to continue to close. Nexen is not the only producer of crude in North America seeking ways to capture the differential for itself, rather than leaving it to the refineries. Others in the US have requested export permits.

Legally permits can be granted by the US authorities but only for minor volumes and only on condition that the refined product produced from such crude is repatriated to the USA. On the other hand the Canadian crude producers only face logistical barriers in that their oil has traditionally been piped into the USA ending up in storage tanks at Cushing, Oklahoma, with no currently built route to a port. The consequent buildup of crude oil volumes at Cushing creates the Brent vs WTI arbitrage and hence Nexen’s move to rail crude to a Canadian port.

Ironically the US refineries presently capturing the arbitrage by exporting product were mostly sold by crude producers who were integrated companies, because they suffered from low refining margins in the past. Such refineries are unlikely to be able to compete with the likes of Reliance in India, i.e. modern sophisticated refineries, when the arbitrage no longer exists.


Tuesday, February 12, 2013

In a world of complex technology only those with mastery will always find work – have you adapted your career plans?

As early as April 2001, Carayol & Firth wrote:
"Create and establish your own goals and your own road map for your own success."

" ... see your organisation as a temporary partner in your life but not the means and the end of it. Your company (employer) is a momentary co-creator with you of developments, growth, learning, fulfilment, meaning and wealth - not the source or benefactor of those crucial things. This mind-set, funnily enough, will reciprocate your organisation's real thoughts about you ..."

"The syndrome of employment as a ghost-marriage is a great danger to one's personal Voodoo. For better or worse, for richer or poorer, staff stay on and on, not daring to imagine, let alone attempt, the single life again. This slow paralysing of thought, innovation and empowerment wreaks havoc in time on any healthy organisational system - and on the personal system."
René Carayol & David Firth, ‘Corporate Voodoo: Business Principles for Mavericks and Magicians’.

Richard Scase noted in his article ‘The Future for Business’ several years ago:

"Companies are being forced to reinvent their management cultures ..."

"In this emerging future business world, old textbook categories that separate the economics of large and small firms, different economic sectors and the importance of geographical location no longer apply. The core assets of companies cease to be their technologies and other tangible assets. Instead, the core competitive advantage of businesses is now intellectual capital; in other words, brain power."
To read the full article see:

Lynda Gratton in her book ‘The Shift: The Future of Work is Already Here’ published in 2011 notes:

“In a world of more and more complex technology, it is the highly skilled employees, or what I will call those with mastery, who will always find work.”

Writing about the year 2025 she continues later, “With the emergence of mega-cities, instead of connected parts these suburbs are increasingly becoming slums. Far from claiming their own purpose and identity, these concentrated areas of ‘surplus humanity’ exhibit intense poverty and little direction. This disconnection has been exacerbated by vast urbanisation that has seen millions of people leave the land, hoping for a better life in the cities. As the slums around Mumbai or Johannesburg will attest, these hopes are rarely realised.”

The term ‘surplus humanity’ is jarring when first read but it should be noted that this quotation is taken from the ‘downside’ 2025 scenarios presented by Lynda Gratton in this ‘wake-up call’ book. It is clear that having a general skill in future will increasingly see one competing for employment with five billion equally capable people, as well as robots and computers. Therefore one will need to cultivate mastery – the ability to add value that no one else can match – in a series of fields over a career. A career that will likely span, not 35 years but up to 50 years, as life expectancy lengthens towards 100. Certainly the days of starting a first job with a corporation and leaving one’s career to the corporation to decide, then retiring on an adequate pension at 60 or 65 ended more than 20 years ago. Sadly many companies still see from their point of view the advantages of having employees think that that is still the contract, at the same time as corporations have no intention to return such ‘loyalty’. When it no longer suits the next quarter results to retain an employee, or indeed a whole division or business line an unceremonious parting will swiftly ensue.

‘The Shift’ is a book well worth reading if you do not intend to leave your future, and the future of those you care about, entirely in the hands of others and the forces that will shape work in the future. Those forces, as listed by Lynda Gratton are; (a) the needs of a low carbon economy and finite energy resources, (b) rapid advances in technology, (c) profound changes in longevity and demography, and (d) important societal changes. The book gives the reader an opportunity to imagine what a work-day in 2025 could be like, and some guidance as to how one may prepare to ensure the outcome is positive rather than negative. See:

William Gibson was inspired in 1993 when he said, “The future is already here — it's just not very evenly distributed.”

It behoves us to look around, see what is already happening and position ourselves and those we care about to ensure the best possible future outcome.