In global business early and immature action for the commitments may expose risks to the business. At MAXENERGY We have properly managed exposed risks and simplified risk mitigation process by identification possible risks and measurement of our risk appetite. This approach has maintained noticeably valuable contribution for sustainable services to our customers and will have later on.
The major risks we are considering include:
Market risk is the main risk that commodity trading companies have been challenged and results from commodities prices fluctuations. Our policy to mitigate the market risk is to hedge trading cargo. With large volume orders we address the risk by buying and selling cargo at the same price period due to reliable relationship between the company and the trading counter-parties on the back to back basis. For Buying large volume and selling retail we mitigate the risk on the back to back basis as per retail plan with the suppliers. In case of not back to back trades, the company hedges the market risk through future or swap contract. It is noteworthy that buying and selling large volume and buying large volume and selling retail cover 80% and 20% of total turnover of the company respectively.
Credit risk arises from the loss that may occur due to failure in payment of any financial contracts. In order to mitigate the credit risk, MAXENERGY has a screening process that is applicable for the potential customers of any size. Our process mainly includes assessing the financial health of the customers through giving a score to the companies based on available historical financial information or qualitative considerations such as size of the company. If credit scoring is not applicable, we minimize exposed credit risk through diversification on the number of customers to reduce the size of overdue payments.
Compliance and Reputational Risk
Reputational risk occurs when the brand loses its value and mindshare in the market due to bad performance, failure in commitment and undertaken responsibilities or financial crisis. MAXENERGY is well aware about legal consequences and financial risk exposure due to failing to act in accordance with governments laws and regulations. To mitigate the risk, the company’s agents and employees are well trained to undertake responsibilities to provide transparency and required screening on all trades. In case of unwanted and unintentional incidents that may expose company to reputational risk, swift action to do compliance may prevent severe damage to brand’s reputation.