Risk Management Practices by Royal Shell - 1909 Words

{draw:rect} {draw:rect} {draw:rect} {draw:rect} Risk Management practices by Royal Dutch Shell plc {draw:frame} Risk factors considered by Royal Dutch Shell plc Prices of oil, natural gas, oil products and chemicals are affected by supply and demand. Factors that influence these include operational issues, natural disasters, weather, political instability, or conflicts, economic conditions or actions by major oil-exporting countries. Price fluctuations can test our business assumptions, and can affect Shell’s investment decisions, operational performance and financial position. CURRENCY FLUCTUATIONS AND EXCHANGE CONTROLS As a global company, changes in currency values and exchange controls could affect our operational performance and†¦show more content†¦Shell uses risk management systems for recording and valuing instruments. There is regular review of mandated trading limits by senior management, daily monitoring of market risk exposure using value-at-risk (VA R) techniques (see below), daily monitoring of trading positions against limits and marking-to-market of trading exposures with a department independent of traders reviewing the market values applied to trading exposures. Shell’s exposure to substantial trading losses is therefore considered limited. Shell utilises VAR techniques based on variance/covariance or Monte Carlo simulation models and make a statistical assessment of the market risk arising from possible future changes in market values over a 24-hour period and within a 95% confidence level. The calculation of the range of potential changes in fair value takes into account positions, the history of price movements and the correlation of these price movements. Each of the models is regularly back tested against actual fair value movements to ensure model integrity is maintained. Credit risk Shell has policies in place to ensure that wholesale sales of products are made to customers with an appropriate creditworthi ness. In addition, Shell has policies that limit the amount of credit exposure to any financial institution. There has been no significant level ofShow MoreRelatedSWOT Analysis of Shell in Nigeria1364 Words   |  5 PagesOverview of Shell and Operations - Shell is a group of energy and petrochemicals companies, which are operating in more than 140 countries and territories. The Royal Dutch/Shell Group, commonly know as Shell, is an amalgam of over 1,700 companies all over the world. 60% of the Group is owned by Royal Dutch of the Netherlands, and 40% is owned by the Shell Transport and Trading Group of Great Britain. These two companies have worked together since 1903. Shell includes companies like Shell PetroleumRead MoreRoyal Dutch and Shell1212 Words   |  5 PagesBackground. 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