Minimize Risks Through The Use Of An Export Documentary Credit


If you want to get into exportation, you must know that the opportunities come with a significant amount of risks. An export documentary credit is among the efficient risks management tools used by season exporters.

Advantages Of Export Documentary Credit

First, it can help minimize the risk of non-payment by your customers. If you issue a documentary credit, the bank of your customer must pay you upon presentation of the export documents.

Second, using this will provide you access to funds without the need to draw from the credit facilities of your company. You just need to present the required documents to your banks. When these documents won’t comply, your bank will provide you with an advance once your documents are accepted.

It is very important for you to choose the right bank to partner with as this can help make sure that you avoid problems related to document compliance.

Who Needs A Documentary Credit?

Companies wanting to minimize the risk of non-payment – This can actually be achieved by utilizing bank channels in order to control commercial documents.

Exporter with customers who are unable or unwilling to provide documentary credit

Companies that need to quickly process documents and resolve payment problems

Companies wanting to provide a very flexible credit term to buyers without the need to compromise their position in cases of non-payment.

How It Works?

You and your buyer must first agree on using this solution as the form of payment. Both of you must sign a contract. After that, your buyer must apply for a documentary credit. The bank, on the other hand, needs to determine if your buyer is credible and qualified. When the requirement of such bank is satisfied, it will then provide the documentary credit. And this document will be forwarded to your bank.

When your bank received these documents, it needs to authenticate the documents and make sure that these adhere to the terms and conditions. Your bank will also notify you that it already received the documentary credit. You, on the other hand, must check if the documents will match the stipulations in your contract with your buyer. When there are discrepancies, you must ask your buyer to resolve such.

You can then ship the orders of your buyer after that as well as present the required documents to your bank. Your bank needs to verify these documents and forward it to the bank of your buyer to request for payment.

Lastly, the bank of the buyer must examine these documents. After which, it will forward the payment to your bank.

Source by William Drew

Crisis Management Ain't Fun! (The BP Fiasco)


In business, crisis management is practically unavoidable. Mistakes will be made. Accidents will happen. Products will be flawed. Acts of God will continue.

Since you can't avoid crises, you'd better prepare for their inevitable eventuality, and: act promptly, intelligently, decisively, strategically, politically, sensitively, honestly, and with a genuine effort to resolve the issue and prevent further harm and recurrence .


As a reminder, some major crises include: Johnson & Johnson (Tylenol); Proctor & Gamble (Tampon / toxic shock); Union Carbide (Toxic Chemicals); Three Mile Island (Nuclear); Hurricane Katrina ; Exxon (Valdez / Oil Spill); the 2008 Financial Meltdown (as well as many prior Market crashes), and most recently, the BP (Oil Spill).


This is being written on around day 45 of the Gulf (of Mexico) Oil Spill Crisis. BP (British Petroleum) is under siege with public relations, environmental, and financial problems, as a consequence of a disastrous, deadly, contaminating, incident of unprecedented proportion. This infamous event began in late April, 2010 when an explosion destroyed the surface drilling platform, (with 11 platform worker fatalities), and shut-off devices failed to turn off the gusher of oil spewing from a severed pipe at the bottom of the sea , one mile deep.

Various strategies were tried to stem the daily multi-thousand barrel flow of pollution from the wrecked installation. Robots were placed to handle repairs at the high pressures, great depth, and poor visibility, on the seabed. The US Government mobilized it's resources (Coast Guard, FEMA, various federal agencies, National Guard, etc,), but were largely ineffective and responsiveness appeared to be "too little; too late." BP tried multiple approaches to capping the well and stopping the oil flow. Approaches termed: "Top Kill,": riser package cap, "" replacing a 'blowout' preventer, "and a longer term" relief well "is in progress ( " BP Begins … New Strategy … " , May 30, 2010 ). So far, nothing has worked, and perhaps irreversible damage is being done to precious wetlands, beaches, and habitats for marine life, birds, animals, and birds. What a mess!


"Crisis Management" is a leadership specialty, and reputations and fortunes of individuals, governments, and private companies can be severely, perhaps irreparably, damaged if the event, public perception, and restorative actions are mishandled. The classic strategies for these types of events were largely ignored, or conspicuously fumbled. The President of BP looked bad, as did the President of the United States. Ineptness appeared to rule the day and the government, along with one of the largest energy corporations in the world, were unable to control, or resolve the event.


Although there is not consensus about how a crisis should be handled, there are a number of common themes. The basics are:


The most important activity which can be taken, is to take action (s) to prevent a crisis from occurring in the first place!


Should a crisis occur, despite all your good preventative efforts, have plans in place to deal with likely, unlikely, and forecastable occurrences. Appropriate planning, prior to the inevitable disaster, will help focus efforts, limit delays, and mitigate the damage. It provides a level of reassurance for all owners.


Initiate timely, forceful, and focused actions to limit the scope and duration of the crisis.


Management consists of planning, organizing, leading and controlling. In a crisis, the leadership must be clear, respected, visible, and trustworthy. Coordination and resource management are essential; project management skills are required.


Honesty, transparency, and frequency are important. Deception, minimization, hiding, or avoidance are deadly. Trust will be lost when lies or misrepresentation are discovered. The press needs access, and will become hostile if spokespersons are not forthright.


The crisis needs to be handled in an ethical fashion. It is essential that morality supersede financial considerations.

The emotions, health, feelings; personal and financial impact on individuals are paramount considerations. Leaders need to sincerely demonstrate their compassion, sensitivity, and empathy for those adversely impacted. The human side of crisis will undoubtedly require immediate, continuing, and genuine support.


The BP incident appears to have been mishandled on so many levels that it will surely be a case study on how crises should NOT be managed. BP has suffered billions in stock losses, and probable financial liabilities. The damage to business and government reputations and trust is yet to be determined, although it is appears major destruction has been done in this arena, as well as to the environment and economy.

With the high stakes implicit in major crises, managers would be smart to consider the aforementioned points; update, review, and revise their Crisis Management Policies and Plans, and be prepared. You don't want to be in the news for your mis management in a crisis.

Source by Dr.

Reducing the Risks of New Product Development


Risk, a Constant Companion

1. New Products are only successful if people buy them.

2. Studies say that 50% or greater of new products fail. Why?

  • Not because they don't work
  • Not because they are not good products.
  • Not because of technical issues.

3. Then Why?

  • A Faulty Understanding of customer needs.

If you don't understand what the customer needs or wants you can not fulfill that need.

Customer Integration

  • Integrate customers into the innovation.
  • Ask for product ideas
  • Only pursue the most popular
  • Get purchase commitment before final development
  • This is called "Collective Customer Commitment"

Major Changes Needed.

  • The traditional New Product development process.
  • Makeup of New Product Teams.
  • Involve the Customer, Designer, Production and management in the NPI Decision.
  • Reduce the Risk of Failure by getting purchase information before Production.
  • Sell ​​Before You Produce.

Limitations to Traditional Market Research

1. Focus Groups

  • Too small to be indicative of population.
  • Lack Realism, only verbal description of product.
  • Not a measure of real purchasing behavior

2. Test Marketing

  • Expensive
  • Time Consuming
  • Exposed to high level of noise from competitors.

Food for Thought

  • Only 50% of fortune 500 companies use focus groups.
  • Less than 25% of fortune 500 companies use limited roll out or Concept testing.
  • Many consumer goods companies do not regularly survey potential customers.
  • Excuse; "Behavior of Customers is often impossible to predict"

So what do they "Do"

1. They develop variants of existing products.

  • Different sizes
  • Added functionality

2. They put off manufacture till they see what will sell.

  • Stock or manufacture generic components.

3. Manufacture on Demand. Full Customization.

  • Customers define one off products for manufacture.

Collective Customer Commitment

1. Not a new idea

  • New homes bought from plans.
  • Concept products assess the willingness to buy

2. What is new

  • This concept used for FMCG products.

3. Why?

  • Consumers now are more informed.
  • They want a greater say in what they purchase.

Collective Customer Commitment

1. Very successful when testing Innovative Products.

  • Yamaha, Electronic Guitar. An aid to learning how to play guitar. Pre order enough to allow production

2. Very Successful when market segment is small

The Best of Both Worlds

1. Does Collective Customer Commitment suit all firms

2. No.

  • It will suit some firms and will not suit others.
  • Some firms will use a hybrid of conventional and collective customer commitment.
  • For firms that can use it, collective customer commitment can reduce significantly the Risks associated with new product development.
Source by Sachin Agrawal

Information on the Pipeline Integrity Management Program


Gas pipeline operators must follow the rules of the Pipeline Integrity Management Program. It was developed with a focus that transmission pipelines in higher consequence areas (where there is a much higher chance of failure) be made safer. Here is some more information about the program.

In accordance to the rules of the program, all operators and owners of gas transmission pipelines must implement plans and make assessments periodically and also make reassessments in order to evaluate and identify potential hazards concerning a pipeline. Also, any significant defect that is discovered must be fixed. The lines have to be monitored so effective modifications can be made if needed before any hazardous situation arises.

This management program is meant to make the pipeline system safer by improving it and also to effectively allocate resources. It is meant to both analyze and identify potential signs of upcoming events that may arise due to a transport incident. This program also provides an integrated and comprehensive means to examine and compare all the potential risks and how to reduce the activities that are contributing to heightening those risks. It also provides a means to comprehensively structure, select, and implement the activities that will specifically reduce risks.

Another thing it was designed to do is to ensure and utilize that only completely trained and qualified companies and their personnel who handle risk management maintain safety measures. Each company that follows it is required to have a fully trained staff. The staff must be equipped with the skills necessary to enforce a high level of security and to act as a responsible party representing their company.

This program has some additional requirements. Pipelines that have areas that are dense have to be appropriately covered to avoid the chance of having an incident in the future. This is done by professionals who measure the pipelines according to diameter, distance, and pressure. After these dense segments are covered, the operators of the line must inspect these covered areas and make sure they meet the standards of safety.

Many hazardous conditions can occur if a pipeline is not properly monitored and maintained. This program is a means to prevent them. Hazardous conditions that occur in these lines include an external corrosion, an internal corrosion, a stress corrosion or crack, a manufacturing defect (meaning a preexisting defect), wrinkles, bends, weld defects, girth defects, coupling failures, and mechanical damage. These hazards can result in societal, environmental, customer, and financial impacts.

If a potential hazard is identified, it is meant to be corrected in a timely manner. Prompt action must be taken after the level of the hazards and risks are assessed. After the assessment, the area of hazard will be officially examined again within one hundred and eighty days to ensure that all necessary repairs were made and that the problem has been fixed. During this period, the pipeline will be temporarily shut off until the repairs made have been deemed successful.

That was some information on the Pipeline Integrity Management Program. It was designed to make pipelines safer by periodically checking them. It is followed by companies to ensure that potentially hazardous situations in the future not occur and it is a preventative measure.

Source by Darrell Surmons

Your Business Doesn’t Have To Be So Risky


One of the big fears people have about having their own business is that it is risky. And that’s true.

I don’t want to minimize that, because you’re taking a risk to put your economic welfare in your own hands. (You’re also taking a risk, and I would argue a bigger one, to put your economic well-being in someone else’s hands, but that’s for another article!)

What’s also true is that taking risks to have your own business can be reduced by the choices you make. And having your own business has big benefits.

In your business, you have 3 kinds of risk: 1) risks you can prevent, 2) risks you can reduce, and 3) risks you have little control over.

Let’s clean things up right away by looking at #3. Examples of risks you have no control over are external to your company. They include the weather (if you have a weather-affected business), or other companies popping up that do the same thing.

Risks you have little control over can’t be prevented. But they can be identified, and the sooner you can do so, the better. Then you can decide what to do to minimize their effects. Make a list of potential external risks and include what you plan to do to monitor them part of your overall strategy.

For example, keeping an eye on other companies popping up that do the same thing can include regular internet searches and consistently following through on news you may hear through your contacts of a new company on the scene. Depending on what you learn, you can decide if this new company provides you with:

· New ideas for offerings you can create

· Opportunities for collaboration and joint ventures

· Greater clarity for your own marketing, to help prospects distinguish you as a provider.

Some risks you can prevent by getting insurance, or obtaining legal advice. Relatively easy solutions can do the trick.

Next we’ll look at the first kind of risk, #1: risks you can prevent. We’re talking about risks within your own company. For example, you’ll want to ensure that your processes are clear, so that everyone involved can follow them with a minimum of errors or time wasted in confusion.

These are the easiest risks to manage, but not everyone does so because procedures aren’t sexy. They are, though, the backbone of providing a consistent product or service that your clients can rely on.

You can manage these preventable risks by monitoring and guiding people and processes toward the standards of quality you set. Create a procedures manual and test it out, to ensure everyone knows what to do. Add a step for quality testing, to see if the procedures are clear and being followed.

Finally, the second kind of risk, #2: risks you can reduce, are the most fun. These are risks you voluntarily take so that you can improve your outcomes. For example, a bank takes on risk when it lends money. You may take on risk when you spend time researching a new possibility for an offering.

This kind of risk is strategic. The risk itself isn’t in itself undesirable. The flip side of this kind of risk is opportunity. Managing these risks effectively increases the possibility of gain. Reaching out to a potential new client group that is large and potentially lucrative is a risk you may want to take for the high potential income.

Minimizing risks takes some thinking and planning. First, how can you minimize the risk before you begin? In our example, you can get to know your new group of prospective clients really well. Do research. Talk to them. Really invest in understanding what their problems are and how you might be able to help solve them. Get to know them personally: build relationships.

Decide how you’re going to manage the risk factor once your risky venture with this new client group is underway. Track your progress. Is your investment paying off? Don’t get stuck with the same strategy if it’s not working. Make adjustments quickly. Change direction as you learn more, if it’s warranted.

As a general rule, make the scale of your effort to prevent or reduce a risk consistent with its consequences. If the consequences are major, spend more time and energy than if the consequences are minor. There may even be risks you can ignore, because they’re really unlikely and have minor consequences.

Risk management is part art, part science. These risk management strategies can help you take on bigger risks, with bigger rewards for everyone. It’s worth putting energy into thinking things through before you begin to invest time and energy.

Taking calculated risks, making good decisions around what’s probable and what you’re willing to do, is a good way to keep the risk factor in your business to a minimum. Your business doesn’t have to be so risky.

Source by Ursula Jorch

What Are the Hidden Threats to Driver Safety?


When you’re running a business, you’ve got a whole host of obligations. Those obligations range from profit obligations to shareholders all the way to smaller obligations, like a promise made to a junior member of your team.

Above all else though, your first and primary obligation is always that of the safety of your employees. It comes above all else and is severely punished by the law should you fail to ensure effective care and protection for your staff.

In your own premises, ensuring safety is simple. After all, the risks within a building are often predictable and easy to manage. But what about when your staff step outside of your premises and take to the road using your fleet vehicles? You still have a duty of care, after all.

The answer is fleet risk management, but what are the hidden threats to your business that fleet risk management can protect against? Let’s take a look.

Invalid/banned driving licenses

It might seem like a slim risk, but there are a shocking number of drivers on the road which have had their licence revoked, are driving with an expired license or have been disqualified from driving for a period. In fact, 1 in 650 drivers who have had their licence checked are driving while disqualified and 1 in 300 have a revoked or expiring licence. Additionally, 1 in 16 drivers have issues with their photocard.

Driving with any of these issues is illegal and, should an accident happen, you will be held personally liable for failing to check their credentials. It’s why fleet driving license checking is utterly vital in a comprehensive risk management solution.

Bad driving habits

We’re all guilty of bad driving habits, picked up over years of driving the roads. Those bad habits are dangerous in our own vehicles, but in a fleet vehicle, it risks putting the entire business at risk unless you move to address them.

Whether it’s things like taking a corner too quickly, failing to check wing mirrors, consistently driving above the speed limit, late braking or any other bad driving habit, anything can put you, your staff and the public’s safety at risk. It’s why driver retraining is a legal requirement.

Other drivers

You can be as safe as possible on the road, but you simply can’t always predict what other drivers on the road will do. Either by inattention, inebriation or simply dangerous driving, many accidents which happen won’t be your staff’s fault.

Fleet driver training, however, can teach your staff to pay closer attention to the warning signs and act accordingly. It’s another small way that training proves essential – especially if it saves a life.

Source by Alec James

Managing Trading Risk With Forex Options


If you trade in the Forex market and you’re not using risk management you are sooner or later going to be out of business. No Forex trading system will do you any good without a good risk management system. For most students learning about Forex trading managing risk is all about placing stop loss orders under your trade, and this is how it ought to be, but be advised, risk management is more than just using stops. If you have ever encountered a Forex market that was so volatile that you couldn’t maintain a position for very long without getting stopped out, then you know that there needs to be a more useful tool for risk management, as stop-loss orders on their own simply don’t make it.

In this article we shall explore the basics of a relatively new tool that Forex currency traders can use to save their skins. This new tool is the Forex currency option contract. Euro against the dollar, but good money management practice dictates that you place a stop loss order under your trades which exposes you to getting stopped out if that market becomes more volatile.

If instead you purchased a “call option” on the EUR/USD currency pair, you would have the benefit of participating on any upward price movement that went beyond the striking price regardless of how much that is, and your total risk for that trade would be strictly limited because you paid a premium for that forex option contract. Your risk could not be any greater than the premium that you paid for the option.

This can mean a lot to you if you really want to buy the euro right now, but you are not able to because your risk management parameters do not allow you to enter the market because of a dearth of good places on the chart where stops can be placed. Options by themselves are simply contracts that give their owners the right, but not the obligation to buy or sell something of value at predetermined price for a specific period of time regardless of what the market price of that asset is. These rights provide an inexpensive way to participate in a big market move while limiting your risk to only the amount paid for the contract.

A Forex option contract gives you the right to buy (or sell) a currency pair at a predetermined “striking price” up to a certain date regardless of what the prevailing value of that pair is at any time up to the expiration date of the option. If the option contract turns out to be worthless then the holder would just abandon the option and walk away knowing that he or she has no further obligation.

If on the other hand, the currency pair in question makes a big move pushing up beyond the striking price, then the option will have real equity, and the holder can exercise it and take delivery of a currency position that is “in the money” and therefore instantly profitable. The key element to this strategy is in the limited risk associated owning the Forex option contract. Let’s assume you believe that the euro is going to gain against the U.S. dollar. You can of course go long. So, as you can see, adding currency option contracts to your trader’s toolbox for risk management purposes can bring about a better string of results and a more profitable equity curve.

Source by Jeff Webb

Control Self-Assessment



Control Self-Assessment (CSA) is a technique that was originally developed by Gulf Canada in 1987. In March 2000, the European Commission approved a white paper on CSA. In the United States when the Sarbanes-Oxley Act was implemented in 2007, section 404 of the Act required the companies to perform a top down risk assessment which necessitated CSA. In the United Kingdom in 2011 the Financial Services Authority (now Financial Conduct Authority) recognized in its recommendations for the improvement of operational risk management that the assessment of risks through a control self-assessment may be an important means of identifying risks. Today, a wide range of entities including private sector companies, voluntary sector (charities) and the public sector entities use CSA to assess the effectiveness of their risk management and control processes.

The Institute of Internal Auditors run courses, seminars and offer Certification in Control Self-Assessment (CCSA).

The Information Systems Audit and Control Association (ISACA) created a framework called COBIT (Control Objectives for Information and Related Technology). Control Self-Assessment is contained within COBIT's Control Objective ME2.4.

What is Control Self-Assessment

CSA is a management technique that can be used to assure key owners, both internal and external, that a company internal controls system is reliable. CSA allows managers and work teams directly involved in the business units, functions or processes to participate in assessing the company's risk management and control processes. CSA can cover objectives, risks, controls and processes.

CSA is a sustainable process whereby management validates the operating effectiveness of its internal controls via testing. Each process owner and functional control owner within a company performs effectiveness testing to verify that the key controls are operating effectively.

Each process owner develops test scripts for each key control and engages their team to perform the given tests throughout the year. This allows management to verify that these controls are working effectively. A CSA program expands the role of operations management from merely assessing the design of its internal controls to testing and validating the effectiveness of its internal controls throughout the year.

Benefits of a CSA Program

An effective CSA program can deliver a number of benefits including:

• Creation of clear line of accountability for internal controls;

• Minimising the risk of fraud;

• Creation of an improved controls environment resulting in a lower risk profile for the company;

• Sustainability of management's compliance program;

• Reduction in regulatory compliance costs

CSA Program

The first step in any CSA program is to document the company's control processes with the aim of identifying suitable ways of measuring or testing each control. The actual testing of the controls is performed by staff whose day-to-day role is within the area of ​​the company that is being evaluated as they have the greatest knowledge of how the processes operate. The common techniques for performing the evaluations are:

• Internal Control Questionnaire (ICQ) or Customized Survey Questionnaires

• Interview Techniques

• Control model Workshops or Interactive Workshops

Some companies choose a combination of methodologies that suits their operations to implement an effective CSA program. On completion of the assessment each control may be rated based on the responses received to determine the probability of its failure and the impact if a failure occurred. These ratings can be summarized to produce a risk matrix showing potential areas of vulnerability.

In any CSA program, the key steps are to define the nature and extent of the company's CSA program, roll out the program, perform the first round of testing and review, and then incorporate lessons learned before going through the process again.


Entities have different drivers for wanting to enhance internal controls environment eg regulatory requirements, change in ownership, change in senior management, implementation of a major ERP system or simply wanting stronger internal controls to improve efficiency. Whatever the driver is, implementing a CSA program should be considered. By implementing an effective CSA program, the entity can embed internal control accountability deep into the company, ensure the sustainability of the internal controls compliance efforts, and ultimately reduce the cost of overall compliance efforts. In other words, an effective CSA program will drive a much improved internal control environment, giving assurance to all keymarks, internal and external alike, that the company controls are operating effectively.

Source by Hari Iyer

Is Your Business Vulnerable to Information and Cyber Security Risks?


Organizations and businesses often operate with significant risk due to an over dependency on reactive risk countermeasures and vulnerability scanning tools. This risk is of concern not only because of the high probability of attack to our IT systems, but also due to the low priority of information security activities when compared to other operational “necessities”. This complex organizational concern, almost assures that information and cybersecurity is NOT given priority until after a significant loss of information or system availability occurs an organization. This risk left unmanaged, subjects all stakeholders to loss of our privileged information and the high cost of system and incident recovery.

The attacks to our systems often target core mission and system services for the purpose of gaining privileged information and for denying access to key services. Gladly for our customers, and us there are risk management solutions that maximize security and provide significant resource and cost savings throughout your business development and operational lifecycle (NOT just when vulnerabilities are discovered). These risk management solutions, once implemented, provide for mission focus and continuous monitoring while also balancing security requirements with business vision, system functionalities, and operational capabilities.

Solutions should integrate businesses own lessons learned with operational activities to fill their own critical Information Security (IS) and cybersecurity gaps. Every business, or peer group, has unique risks that are managed. These solutions have roadmaps and experienced professionals that control the cost and/or complexity of increasing to an increased security level. These experienced professionals’ help in identifying and addressing specific business requirements into policies and plans that support the activities required by both the mission and supporting IS (cybersecurity) standards.

The solutions are implemented using multiple, often overlapping activities and include: 1) Aligning the business mission, vision, goals, objectives and IS value by defining IS requirements early, 2) Provide experienced industry program managers and IS professionals that will work alongside the many stakeholders, 3) Assess requirements and value, recommend solutions, integrate services, and sustain IS value, functions and capabilities to reduce risk, 4) Provide value focused system functions, capabilities, scalability, and performance that improves the mission and reduces risk to the stakeholders, 5) Leverage IS services for continuous monitoring and value added automation.

Risk Management is ultimately related to many projects and tasks that align with your vision and expectation of providing valued services at every level of your organization. Projects have distinct and important phases that are sequential; these project phases’ success or failure directly impact on and ultimately affects the success of the organization. IS is a significantly important piece of many ongoing activities in a diverse and expert environment. A combined program management, systems engineering, and IS professional approach will most quickly maximize mission efficiencies while improving fundamentals needed to meet and implement security controls. Management and technical activities, focused on mission needs, should follow tailored industry best practices to maximize operations, manage risk and be compliant with IS security requirements.

Improving operations and the sustainment of IS is best done from the top down, on both governance and technical levels. This approach has achieved improved operations and has avoided many problems associated with managing both risk and change. With the realization that risks must be managed regardless of the reduction to available funds today, we must view that any resource and cost waste is unacceptable. Thereby, all activities must be run “on purpose” as activities without purpose needlessly add risk and cost to the organization.

Using a tailored program management approach in meeting our security requirements and managing the risk that is always present, our teams must successfully implemented many tools and improvements that put the pieces together to define strategic IS vision, improve IS management and leadership, and improve IS tactical efficiencies.

Source by James E Fogarty

The Energy Risk Professional Exam: What It Is, What to Expect, and How to Prepare


The Energy Risk Professional (ERP) is a professional designation from the American Petroleum Institute (API) and the Global Association of Risk Managers (GARP) aimed at risk professionals working in the physical and financial fields of energy. When I studied for other financial designations I became interested in energy risk management. It was intuitive to me to use energy financial instruments for risk management and hedging, but the physical aspects of the energy risk professional designation were not entirely clear to me. I eventually took the plunge and registered for the November exam in summer of 2010.

My main thought behind registering for the exam was that I found energy and risk management of energy extremely interesting and was (still am) sure that this field would grow tremendously in importance soon. All commerce is in some way related to energy, and I am sure that physical and financial energy risk management will soon spread to other business than simply airlines and petroleum refineries, as is the case today. I would not be surprised if there will also be new energy hedging products on the market soon, but this will clearly veer too far off the topic for now.

The ERP curriculum stretches from physical aspects of petroleum (hydrocarbon genesis, refining, transport with tankers, pipelines) over coal and natural gas, to alternative energy such as solar, hydro, wind, and biomass. There is also a segment of nuclear energy, financial trading instruments, valuation of energy transactions, financial disclosure, and laws and regulations. A large part of the material is electricity.

The physical aspects were actually much more interesting to me, as they contained ideas and concepts that were new to me. Even simple truths like the fact that electricity is not storable and what this means for trading electricity derivatives seem trite at first, but when you get into it further, it opens up a whole new universe.

My main challenge was reviewing and learning the study material. Looking back, I spent about 200 hours preparing for the exam, and passed. If this sounds like a lot, it was. There were simply no tools available at the time that I could have used for a shortcut.

If you work in the energy industry, I encourage you to look into the Energy Risk Professional (ERP) from GARP. This designation is new, but I believe it will grow tremendously in importance over the next few years, and has the potential to help you in your career. I wish you all the best for your exam preparation!

Source by Alex Janis