Download: Commodity trading and risk management
Significant commodity price volatility is a critical factor of business performance for users, producers and traders of commodities. More companies are now setting up Commodity Trading Risk Management (CTRM) functions to respond to the challenges and opportunities.
Traditionally companies have operated a decentralised or federated risk management, where commodity risks have been managed locally by different businesses and where the focus has been on risk transfer and avoidance. However, now there is a move towards centralising commodities risk management under an enterprise risk management model. There are cost savings and synergies to be found and risks are aggregated across all components of the business. This proactive risk management approach optimises the value of the underlying commodity which is core to their business performance.
In our publication Applying a successful approach to commodity risk in a volatile market, we review existing approaches based on a company’s appetite for risk and make recommendations for setting up a proactive enterprise risk model.
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