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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