Market volatility and uncertainty create opportunities for growth, but come hand-in-hand with risk. BP knows energy risk.
As a physical asset owner, we have a significant global exposure to most energy commodities. Through decades of experience, we have honed our capabilities in managing the risks associated with a global, multi-commodity physical business. We follow a proven risk management approach to help our customers design a risk management strategy that fulfills their unique risk management goals.
BP’s energy risk management framework
A strong risk management strategy is based on an in-depth assessment of the business and the market dynamics associated with the exposures.
- Identify and quantify risk. The first step to managing risk is identifying it. What risks is your company exposed to? Risk can come from market factors (supply, demand, liquidity, etc.), price volatility, credit availability, internal physical operations, interest rate fluctuations, changes to the regulatory landscape, and more.
- Assess your risk profile. Defining your risk tolerance level and overall objectives. Are you looking for budget certainty? Stable cash flow? Protection of product margins? Dampened volatility? Avoidance of catastrophe? What level of risk is your organization comfortable with?
- Develop and execute a hedging strategy and compliance plan. With a clear understanding of your risks and objectives, we can create and, subsequently, execute a custom hedging strategy that will fulfill your risk management goals. We are able to provide a wide variety of products, ranging from simple swaps and options to long-term financial hedges and exotic options. Find out more about our risk management capabilities.
- Create benchmarks and review. Market dynamics never remain the same. As the key factors affecting your business change so do your risks. It’s critical to create risk benchmarks and regularly assess your risk profile to determine if strategies should be adapted. We work with you to consistently review your risk management goals and adapt your hedging strategies as needed.