FUTURES-DIAGNOSIS LTD

#463 China Works

28 Black Prince Road

London SE1 7SJ

UNITED KINGDOM

Call: +44 (0) 7970 176462

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CASE STUDY

Mitigating risk

We worked with an internationally renowned steel integration company to improve processes and change the way the company responds to risk.

Working together with an integrated steel company which consumes a number of commodities in the steel making process such as zinc, nickel, iron-ore, aluminium, tin, electricity, natural gas, oil, steel scrap and shipping all of which can be hedged on a terminal market.

 

Other commodities such as ferrochrome, manganese and coking coal are not priced this way and raise difficulties in how they need to be managed.

The risk is that prices of these inputs rise which undermines the profit margin of the company. In working with their finance team, we worked to identify the exposure to these metals and helped them to understand global best practice in managing these price risks in a timely and accurate manner. The purchase in of these commodities has to be separated out from inventory and other stock at risk and managed more strategically.

This is a complex process which requires clear lines of communication between the finance, sales and procurement teams including the installation of specialist software capable of reflecting the exposure to their commodity inputs and accurately report the results of the risk management process to senior management and the board.

 

Our input had a major impact on improving lines of communication, governance, policy preparation which all form a critical part of the process undertaken here.

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