The Risks Keep Evolving
As I’m sure you’ve noticed on this page, ComTech is currently conducting a snapshot survey looking at risk and risk management in energy and commodity trading. We’ve done other risk and risk-related studies over the years, both as ComTech and as our predecessor organization, CommodityPoint. However, in the global commodities markets, change is constant and the risks faced by producers, marketers and traders evolve both in terms of magnitude and scope at seemingly breakneck speed.
The changes over the last two years alone have been remarkable – price crashes, cartel agreements to cut production, first (and increasing) LNG exports from the US, growing geopolitical instability, near-constant Chinese economic concerns, Brexit, and certainly, not to be forgotten, the ascendancy of Donald Trump.
Not only has the election of President Trump had an almost immediate impact (such as the elimination of federal blockades on the Keystone and Dakota Access pipelines, and the repeal of the methane emissions reporting requirements for natural gas industry), his campaign platform that focused on reducing regulations is still playing out. Though during that campaign he promised to eliminate Dodd-Frank in its entirety, its still unclear as to whether that will come to pass and what the impacts of a partial or full repeal would look like – will banks return to the market…will traders and marketers no longer face trade reporting requirements and margin restrictions? What happens in the European markets if the US abandons D-F market regulations…will they be forced to follow suit with their regulations in order to remain competitive?
What about global trade agreements which he has promised to either abandon or renegotiate for better US terms? How will cross-border trade with Mexico be impacted…will they still buy US natural gas if Trump eventually abandons NAFTA and starts a massive deportation program of illegal aliens? How will he and his administration handle North Korea and Kim Jung-un’s endless sabre rattling…and how will any actions, military or otherwise, impact the Asia-PAC region generally and US-China relations specifically?
I could go on and on. Trump’s election is certainly a wildcard and has the potential to ultimately be a strong positive, or a strong negative, in terms of price stability and regulatory risks. Unfortunately, it is still early in the game and nobody really knows when and how this will all shakeout. Given the US’ position in the global markets, the role of the US president and his influence on those markets really can’t be overstated, particularly when that president has made promises of sweeping, and almost profound, change.
Under these circumstances, it could be argued that almost all risks are on the uptick…price, regulatory, operational, treasury, etc. Of course, every company is different and the mix and level of exposure to these risks will vary from one to the other. So, that’s why we want to take this time to get your feedback as to your perceptions of which risks are most pressing in the current market and understand the tools and processes you use to measure and mitigate them.
So, we would very much appreciate your sharing your insights with us via a brief survey that can be found here – https://www.surveymonkey.com/r/rsksurvey. Thanks in advance for your participation!
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