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Risk Management

Risk management is the process of identifying, assessing, and controlling risks associated with physical and financial market transactions.  The magnitude and type of acceptable risks vary considerably among organizations.  Some may be risk averse, while others may be risk takers.  In any case, effective risk management ensures risk levels stay within limits reflecting the risk tolerance of the organization.

Risk management services provided by WTL encompass much more than controlling risk.  Maximizing opportunities and helping ensure your business success and security are top priorities.
Risk Management Services

WTL helps businesses and government agencies guard against higher energy costs, preserve and increase revenues, and prevent unacceptable hedging and trading losses.  WTL also provides assistance in the application of sophisticated risk management and trading tools.

Steps to Effective Risk Management

1.      Define your goals & objectives.

2.      Identify the risks you face in achieving objectives.

3.      Determine your risk tolerance.

4.      Establish a risk management policy.

5.      Implement the risk management policy.

6.      Monitor risk through a regularly updated position report.

 

Effective risk management is aware, current, assertive, and cost effective.  It never surprises upper management nor is surprised by the company's risk takers. 

There are a number of excellent risk management resources and tools available on the web.  Here are two of the best.

Tools

The following tools are fundamental in managing price risk:

Futures

Fixed price exchange-traded (New York Mercantile Exchange) or over-the-counter contracts. 

Options

Contracts that, for a premium, give the buyer the right to buy (or sell) underlying futures contracts at a “strike price” on or before a specific date.  Available in abundance on the Nymex.

Funds

Commodity funds in oil, gasoline, heating oil, natural gas, and other commodities.  These funds provide alternatives to futures that are as effective, but less costly and more flexible.

Hedging is an integral part of risk management.  Futures, options, and commodity funds provide several strategies to choose from for buyers and sellers.