Corporate Risk Management in an International Context Robert Uberman Expert in natural resources strategy, finance and R&D

May., the 21st, 2015Robert Uberman for the University of Economics in Cracow seminar Agenda  Key differences in approach to risk analyses between financial and non-financial institutions  Financial instruments vs commodities and individualized products  Operational vs financial hedging 2

May, the 21st, 2015Robert Uberman for the University of Economics in Cracow seminar Key differences in approach to risk analyses between financial and non- financial institutions  Risks and opportunities are head and tail of the same coin: limiting or eliminating exposure to risks imply simultaneous limitation or elimination of the opportunity. Thus a company has to assume risks to access opportunities.  Operational risks are hard to understand and quantify by professionals outside industry therefore premiums charged by financial institutions are prohibitively high. Risk coverage in such areas effectively destroys shareholders value. 3

May, the 21st, 2015Robert Uberman for the University of Economics in Cracow seminar Financial instruments vs commodities and individualized products  Commodities are usually traded on some regulated markets  Commodities are usually produced with standardized processes  Both mentioned above are universal globally, if differentiated – based only on natural/geographical factors 4

May, the 21st, 2015Robert Uberman for the University of Economics in Cracow seminar Sources of operational risks  Clients  Suppliers  Employees  Stakeholders: – Environment (Union Carbon, BP) – Society – Politics 5

May, the 21st, 2015Robert Uberman for the University of Economics in Cracow seminar Clients based risks decomposed  Sales (volume, value, others)  Revenues collection  Claims (volume, value, quality)  Recommendations/reputation 6

May, the 21st, 2015Robert Uberman for the University of Economics in Cracow seminar Operational versus financial hedging 7 Non financial enterprises are primary exposed to operational risks, financial ones follow. Financial risks are easy insurable on financial markets and hardly pushed by financial institutions Most risk coverage products represent source of risk at the same time Companies are pressed to over insure financial risks and under insure operational ones

May, the 21st, 2015Robert Uberman for the University of Economics in Cracow seminar Operational and financial components of risk 8 Financial risk easy to cover Interaction risks ??? Operational risks covered via delivery guaranties and penalties A company entered an EURO 100 million investment contract, with payments due on 2015/10/17 (30% - prepayment), 2016/8/19 (60% - installation delivery) and 2016/10/03 (tests completion)

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