Risk Management

Risk Management has become the buzz-phrase of today’s ever-changing commodity and financial markets - the key driver to securing a long-term competitive advantage. For forward-thinking companies it holds the potential to minimise market risk by combining hedging and trading strategies to manage price risk, stabilise cash flow and mitigate price volatility.

The need for risk management was brought into focus most sharply during the credit crunch and the subsequent financial crisis of late 2008. Huge price volatility in commodities and unhedged positions in new financial products took the blame for the evaporation of liquidity and value destruction worth millions of dollars.

For the shipping market, the issues were similar: long chain charters — sometimes with new counterparts with long exposure to a rising market — came apart when the Baltic Dry Index fell 94% in the fourth quarter of 2008. Some counterparties struggled to manage their positions while others reneged on their contracts.

These events have only exacerbated the need for a more prudent and calculated way of doing business. Monitoring of counterparty credit and price risk are no longer just paper exercises; they can play a vital role in a company’s survival.

Many companies have to a greater or lesser degree embraced an enterprise risk management framework, integrating risk management into their strategic planning, operations management and internal control for the purpose of increasing the organisation’s short and long term value to its stakeholders.

For any company with a need to understand and implement practical risk management, FIS is your trusted partner. FIS, through its global network of branches and trading associates, has the expertise to provide customised management-level advice to help you manage risk within your risk appetite.

We have a proven ability to recognise, develop and exploit nascent derivatives markets and we also provide the tools for managing risk, enabling you to trade with confidence. Combining the experience of our FFA and shipping teams, we have the tools that will allow you to use the best combination of both physical and paper contracts to control price risk, smooth cash flow and mitigate volatility.

Both teams work together to source world-class counterparties to enable you to get your business done, using the latest analysis and software tools as well as offering advice for optimal operations management.