Commodities are Different

Imagine your boss tells you that a new commodities team is starting next week and asks you to set up risk management for the activity. They want you to use the existing tools like VaR and exposure monitoring, stay within existing policies, and keep it simple. Oh, and the credit risk managers would like to ensure the potential future credit exposure numbers for long dated commodity deals are reasonable.

-          How well do you understand the fundamentals of commodities and the physical markets?

-          What legal, compliance and operational risks are there and will they amplify the market and credit exposures?

-          How useful will your standard  risk models, reports and limit structures be in this context?

-          How familiar are you with developments in the competitive and regulatory landscape?

Jan-Peter Onstwedder has over 20 years’ experience in risk management across a wide variety of asset classes and global trading markets, both in a banking and a corporate environment. He has held various risk and trading positions for Barclays Bank in London and New York; worked as Head of Market Risk for the Royal Bank of Scotland; Head of Risk for BP’s Integrated Supply and Trading business; and Head of Risk Management for 3i plc. Currently he works for Citi in London as Head of Risk Management for the global commodities trading division, and as Head of Credit Risk for four global industries (power, energy, chemicals and mining). In 2007 he managed the London Accord, the then-largest ever collaborative research project into the financial aspects of climate change. The report, published in December 2007, placed research by leading investment banks, NGOs, law firms and academic institutions in the public domain.