ETG’s risk appetite is aligned with the Group’s strategy of long-term and sustainable growth. Being exposed to trade in multiple commodities and countries, effective risk management is critical to ETG’s ongoing success and operational integrity. The Group’s risk governance structures afford robust oversight, delineation of roles, accountability and independent assurance. Primary direction is provided by the Board Risk Committee consisting of members independent of the trading group, while day to day oversight is provided by the Executive Risk Committee represented by suitably qualified senior management.
The Group’s risk management framework gives recognition to all the intrinsic risks of its ongoing activities while maintaining a proactive stance in assessing trade practices and exposure. Whereas its policies and processes promote a strong culture of communication and risk awareness, a central risk platform is charged with aggregating, monitoring and reporting on market, credit and forex risk relating to physical and forward commodity and freight exposure.
Limit structures are clearly defined and the result of balancing risk tolerance against operational and financial capabilities. Unmandated residual exposure is therefore hedged, sold, or financed as appropriate with vetted counterparties. The Group also deploys a combination of ancillary risk metrics to measure and quantify downside risk, including: VaR, scenario and stress testing.
In 2014 ETG embarked on the implementation of a fully integrated commodity trade and risk management system (CTRM) in its continued efforts to enhance its Risk Management capabilities.
The CTRM solution, JustCommodity’s ContraXcentral, will integrate with the organisation’s existing ERP solution and aims to deliver the following benefits to the end users in ETG: