White Papers Risk Monitoring and Management Trends In Commoditi | Page 2

INTRODUCTION
Commodity producers, traders, and industrial consumers are all facing a barrage
of risks such as price exposure and cyber vulnerability, as well as legal, credit,
operational and market risks. The risks associated with buying, selling, and moving
commodities only seem to be increasing exponentially with greater regulatory
oversight and a broadening of supply chain operational issues like traceability.
Many of these risks can be business killers – the actions of rogue traders or the
impact of counterparty business failures, for example – and lead to fatal damage
such as an inability to access capital or damage to brands (via issues around
sourcing commodities or producing substandard end-products). Other risks, such
as ineffective price risk management, inefficient scheduling of transportation,
or regulatory non-compliance can erode profitability and damage the company’s
ability to execute on strategic plans and growth initiatives.
Of course, often where there is risk, there
is also an opportunity to profit - but only
when those risks are recognized, effectively
managed, and properly mitigated. The rise in
stakeholder scrutiny and regulatory oversight
also means that being able to demonstrate
effective risk management across the
organization is certainly more important
today than ever before.
Recently, Commodity Technology Advisory
LLC (ComTech), with the support of study
sponsor Allegro Development Corp.,
undertook a snapshot survey of the industry
to find out more about the types of risks
faced by trading companies and to gain an
indication of how and where those risks
were being managed. The increasing gravity
of undertaking proper and effective risk
management means that the enterprise is
now often more focused on these risks at
the corporate level with a senior executive,
usually the Chief Risk Officer - tasked with
recognizing and mitigating risks and defining
and implementing effective risk policies.
While some risks are managed primarily at
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