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At more than 2,000 pages in length, the Dodd-Frank Act is the US government's extensive and wide-ranging response to the financial crisis. From debit card transaction fees to exchange-traded derivatives, there is almost no aspect of financial activity that has escaped its attentions.

Dodd-Frank was signed into law well over a year ago -- in July 2010 -- but the US financial and trading landscape is still being defined. The finer points are still being negotiated, clarified by lawyers, and challenged by Wall Street players. Becoming compliant in this environment will be no easy task.

For energy and commodity firms operating in Europe, this is a cautionary tale. Since the global financial crisis, lawmakers have sought to level the pan-national playing field in order to minimise opportunities for regulatory arbitrage. Subsequently, the EU is introducing numerous intertwined pieces of legislation that will affect the financial and commodity markets.

This alphabet soup of directives and legislation includes the Regulation on Energy Market Integrity and Transparency (REMIT), the Market Abuse Directive (MAD), the second Market in Financial instruments Directive (MiFID II), the European Market Infrastructure Regulation (EMIR) and the Capital Requirements Directive (CRD). Between them, they bring a number of key areas under stricter control, including operational risk, electronic confirmation matching, credit risk, collateral management, capital adequacy, and liquidity management.

The EU's objective is to have the all legislation in force by the end of 2013. Although no one can be sure what the exact provisions will be, it is clear that all companies trading over-the-counter (OTC) derivatives will be impacted across the whole value chain from front office sales through to back office reporting and all points in between.

In the US, the Dodd-Frank Act is rightly viewed as the latest and most pressing incentive for companies to drop their antiquated spreadsheets in favour of the built-for-purpose, precision tools that modern commodity management demands. All the signs are now here that any firm operating in Europe's energy and commodities markets will also need effective technology to handle upcoming requirements.

Many of the regulations are not yet fully baked, but the general orientations are clear. So rather than ducking for cover and waiting for the bomb to drop, now is the ideal time to prepare for what is coming. Companies should perform a comprehensive audit of their IT systems in order to identify areas where they are likely to be exposed to compliance risk under the new legislation. There are certain areas that should be given particularly rigorous scrutiny, including:

• Reporting. Businesses in the commodity and financial markets need robust reporting functionality in order to comply with regulations that require OTC derivative contracts transactions and holdings to be reported to trade repositories. The entire trade lifecycle must be reported, including exercise of any constituent option or 'swing' components, price adjustments, and any interim or financial settlement, or early termination/default.

• Auditability. A company must have rigorous audit capabilities, particularly in light of strict directives related to insider trading contained in REMIT and MAD. IT systems must be able to keep detailed audit trails behind all trading decisions, because in the event of a dispute, this information will be inspected by regulatory authorities.

• Documentation. Systems should be able to provide strong documentation of trading strategies, as the new legislation tightens some exemptions while removing others previously in force. Having the proper documentation to substantiate any end-user exemptions a company chooses to take will be crucial as regulatory authorities cast a wider net over commodities traders.

• Integration. Trading systems must have the capability to integrate with third-party systems such as trade repositories and clearing houses in order to meet the new reporting and OTC derivatives clearing requirements specified in MiFID II.

Even those companies who are fortunate enough to not be affected by the new legislation -- and they are small in number -- should still perform regular IT system audits. Firms need to ensure that they meet current business requirements, and that their systems are flexible and scalable enough to meet future demands, whether they come from customers and the market, or from regulatory authorities. The scope and scale of legislation is certain to expand and bring an even wider range of companies into its remit as time goes on.

It is an understatement to say that every company involved in the commodity markets needs a flexible, robust, and comprehensive Commodity Management solution to meet regulatory requirements. Failure to implement the needed reporting functionality, auditing capabilities, and other features required to ensure compliance could result in stiff penalties, criminal prosecution, and in extreme cases, the complete demise of a business.

If your systems are inadequate and leave you open to compliance risk, you need to take action now. This current period of calm before the regulatory storm offers the ideal opportunity to get the necessary infrastructure in place to ensure compliant, cost-effective, efficient, and optimised operations that are ready for whatever the future holds.