Presently , there are
knee-jerk competition with the growing rick of sophistication of
customers and investors and the growing demand of different kind of value added
products and services have forced most of the organizations to rethink about
their business strategies those are associated with the commodity and their
operations. As these is now introducing more complex trading products and
strategies to be competitive. These actions come with various risks.
There are various risks including-
Lack of knowledge for
business models: If someone has lack of knowledge for business models
include unidentified transactions, offshore entities and with any deem purpose.
When the time comes for trade sanctions, with anticorruption and anti money
laundering laws, they may involve with high legal reputational risks. The
trading leeway those are unexpectedly high, they may indicate the lack of
knowledge of transactions which have been excited due to arm’s length
basis.
A peak of overhead
price: In trading procedure, high overhead price can force the traders to
generate profits and to take risk positions. For commodity trading companies, it is very essential to keep the cost
structure flexible to adjust the proper time limited trading opportunities and
helps to avoid in order to enter the non-performing trades.
Judge for the best performance- For the companies, it is
very important to find out how the strategies contributed on the result of the
entity whether the entity was profitable when adhering to its risks to be kept
in limits. A proper strategy with different trading plans which is consist of
outright speculation and that speculation on spreads or arbitraging positions
must be able to explain the accurate financial results of every strategy. Stake
holder will worry when the management can’t explain the soul cause of the results
which has a history of financial performances.
Inexperienced Risk
Managers : While above circumstances
will come with full force, risk managers may feel pressure from the traders to
increase the trading limits to go through into specific transactions. In such
times, risk managers with lack of experience and insufficient authority within
the origination may not be able to withstand on these pressure which can be put
company in risk. Trade commodity finance need to be proper consideration which will
lead to a riskless result.
