Importance of Risk Management in the Commodity Trading Industry
With commodity supply chain management firms constantly being exposed to various risks that may lead to financial distress, Satoshi Systems wants to emphasise how crucial risk management is for business success.
Risk Management is the process by which the value of the company is enhanced by improving the quality of earnings through prudent risk taking and control of risk. It involves a constant trade-off between controlling risk and taking risk in an attempt to enhance return.
A midsize commodities processing and trading firm faces various types of risk in the course of its business activities in the upstream, supply chain and midstream segments. These risks can be broadly categorised as financial, operational and other risks. The company also faces the possibility that different risks may occur simultaneously (referred to a ‘Dangling Participle Risk’), and the probability that the company is completely free from risk is very small given the wide range of business activities and geographies in which the company operates.
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