Risk Monitoring & Management Trends in Commodities A ComTechAdvisory Whitepaper
ASSESSING THE RISKS
For a majority of the respondents, market risk appears to be most important risk facing their organizations. Market risk generally incorporates price risks along with analytical analysis such as calculating Value at Risk( VaR), performing stress tests, and mark-tomarket monitoring and reporting. The least ranked risk was identified as operational risks due to employee activities( including, for example, rogue trading). All other forms of risk were really quite closely ranked together( Figure 2) when scoring the responses demonstrating how broad and varied risk management has become in the commodities industry.
Figure 2: Overall Ranking of Risk Types Posed to the Business companies then are market risk, credit risk, and regulatory risk- representing 2 / 3rds of respondents in total. These results were even more magnified when asked about the most important risks to the individual respondents in their roles.
Figure 3: Relative Important of Types of Risk
9 %
6 %
12 %
9 %
3 %
6 %
15 %
3 %
37 %
Market risk monitoring & analytics Treasury Risk Credit Risk Legal Risk Regulatory Risk Operational risk- scheduling Operational risk- employee activities Operational risk- other IT risk
Most Important
Least Important
Market risk monitoring & analytics( VaR, stress testing, etc.)
Operational risk- logistics and scheduling processes
Credit( Scoring, Exposure monitoring, Analytics)
Regulatory risk Treasury risk( FX, IR, Liquidity)
Legal risk( Contract management and embedded optionality)
Operational risk- other( Asset management, etc.)
IT Risk- cyber attack, unauthorized access, etc.)
Operational risk- employee activities
Market risk rose to almost half of the respondents in importance to them in their jobs while credit risk rose to a quarter of respondents( Figure 4). Again, Market risk, credit risk, and regulatory risks combined represented 89 % of the responses and were the most important set of risks to the respondents in their roles.
The respondents also overwhelmingly see market risk as the largest commercial risk factor facing their companies( Figure 3), with more than a third of the respondents citing it as most important to them. The next most important was credit risk with just 15 % of respondents citing that risk. Overall, the three most important commercial risks facing these respondent
Figure 4: Relative Importance of Risk Types to Respondent
Market risk monitoring & analytics Treasury Risk
25 % Credit Risk
44 %
Legal Risk Regulatory Risk
6 % Operational risk- scheduling
3 % Operational risk- employee activities
6 % Operational risk- other
10 % 3 % 3 %
IT risk
0 %
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