Instructions for Assignment Submission and Enterprise Risk Management of Trafigura Group Pte Ltd

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Assignments question(S)
Trafigura Group Pte Ltd is one of the largest physical commodities trading and logistics group in the world. Trafigura sources, stores, transports and delivers a range of raw materials (including oil and petroleum products, non-ferrous metals and concentrates, iron ore and coal) to clients
around the world. Trafigura performs the economic role of sourcing and delivering commodities from one location or customer to another using its global network and infrastructure.

The group involves dealing in non-US currencies, including procurement and sales of commodities, subsidiary dividends, investments in non-US operations, etc. As a trading group, Trafigura typically purchases the commodities from outside suppliers on credit terms. To finance its operations, it uses a variety of funding sources, such as commercial paper, term debt, and lines of credit from major commercial banks. The company invests any surplus cash in securities of various types and maturities, the value of which are subject to fluctuations in interest rates.

Trafigura has a credit division, which provides financing to customers. Overall, the group faces several risks financial and non-financial risks in the value creation process. To manage some of its risks, Trafigura hedge all its inventory through derivative contracts. Some of these derivatives
instruments do not rely on a clearing house and instead effect settlement through the execution of bilateral agreements.

The main demand market for Trafigura has been China, which has shown a significant economic slowdown following the outbreak of the Coronavirus.

a) Outline the keys steps involves in Enterprise Risk Management process?
b) Based on the above discussion, outline the main financial risks exposed by Trafigura Group Pte Ltd and their implications on the value of the company?

c) Taking into account the market concentration of Trafigura Group and the outbreak of the Coronavirus, what will be the potential impact on the risk parameters of the group?

d) What are the measures that can be set in place by financial institutions to manage credit risk?