All trading areas are faced with risk. Exogenous risk includes market, country, interest rate, currency and nature risk. Endogenous risk involves internal corporate governance structures including internal audit and trading practice and limits.
Arabia Trading is a risk averse institution which is focused on long term, steady growth as opposed to short term speculative value. Risk policies fall under the board appointed Risk Committee. Stress testing is a key methodology employed by the Risk department. All trading and position reports are monitored by an independent Risk Department. All physical positions, currency exposures, freight and interest rate positions are hedged where ever possible utilizing derivative instruments available on international exchanges and through blue chip financial institutions. International and reputable insurance companies cover all physical commodity contracts.
Internal Risk is managed through independent reporting to the Risk Department . Through the ERP system, the Risk Department has access to all live derivative and physical position data. Each trader, whether physicals and/or derivatives has trading limits which is set by the Investment and Risk Committee. In terms of physical movement of cash and drawing down of facilities board resolutions with authorized signatories is kept up to date and is adhered to with the various grades of signatories.