Commodity-and-Energy-Risk-Management.pdf

Measure the impact of stressed market prices on

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Measure the impact of stressed market prices on realised and unrealised profit and loss Risk Strategy and Tolerance Assist to define management’s financial and operational risk tolerance(s) based on internal metrics, peer practices, and external expectations and hedge objectives Identify and evaluate methods to protect against commodity price risks including the following risk mitigation strategies: Derivative based hedging (exchange traded; Over-the- counter (OTC) bilateral, cleared) Physical procurement/sales management Assist to define key hedge strategy components, including: Hedge instruments, volumes, timing, frequency, duration, entry and exit points Perform peer and competitor benchmark analysis to assess client positioning against industry participants Risk Aggregation and Reporting Define internal and external commodity risk reporting requirements Define and develop integrated risk reports Identify and develop alternative risk reporting formats and templates/dashboards Identify data and infrastructure requirements supporting the preferred risk monitoring and reporting framework Governance and Compliance Design and document policies and procedures governing commodity risk management Design and document a governance framework consistent with regulatory standards and industry practices Organisations today are increasingly exposed to volatile commodities and increasing stakeholder demands for earnings stability and growth. Effective commodity risk management requires an understanding of the underlying risk, alternative hedge strategies, instruments and marketplaces, as well as the use of effective and comprehensive valuation and risk reporting tools. KPMG can assist to address the risk management requirements needed to successfully address commodity risk exposures. Specifically, KPMG assists clients to identify, measure, control, and report risks associated with physical and financial energy, metals, and agricultural markets. S T R A T E G Y C O N C E P T I M P L E M E N T A T I O N Commodity & Energy Risk Management Model Development, Validation & Remediation Operations Tax Accounting Regulatory Internal Audit Forensics & Investigations Governance, Roles & Policies Hedging & Risk Strategy Credit & Collections Risk Reporting & Management Information Systems 4 | Commodity and Energy Risk Management
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Model Development, Validation, & Remediation KPMG Service Activities Model Development Assist model design and development for risk measurement (e.g., value-at-risk, cash flow-at-risk, earnings-at-risk, credit value-at-risk) Assist mark to market and capital allocation model design and development – valuation models for commodity and energy products, instruments, and contracts Model Risk and Control Identify inventory and rank key financial, risk, and decision support models Review and improve model policy documentation (purpose, applicability, development, ownership, access, and oversight) Assess key risk sources associated with each model
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