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Commodity enterprises are gradually introduced "combination of cash," the way they operate and implement comprehensive risk management. Period are combined with derivative instruments, including hedging, and arbitrage, speculation, basis trade and other business methods of operation, and the "price risk management" is not only a combination of all methods of the current to be covered, and also include more management, decision making, control method.
Commodity main line of business enterprises can be described as a "combination of cash + risk management + intelligent decision", intelligent decisions can be broken down into "quantitative analysis + + intelligent decisions in real-time control." As businesses depend on the pricing decisions at the global, macro-financial data nationwide, industry fundamentals data, analysis of market data related varieties, options and other derivatives, exposures must be applied to quantify the value of the model in terms of risk assessment, coupled with prices are among the derivatives market changes in real time, so take the initiative to build a "smart decision" system of enterprise use of information technology, it is the only way for future development.
In practical operation of the enterprise, hedging and spot supply chain management (ie business plans, contract execution, logistics, warehousing, etc.) as well as price risk management are inseparable, it is difficult to hedge business operations and hedge accounting fully independent design software system. Domestic part of the risk management technology companies from developed countries, industry practices and technology products, research and development of commodity enterprise "of risk management are combined with + + intelligent decision" overall technology solutions, the core product is "CTRM software system" that "commodity trading and risk management system. "
With the 2018 "Central Enterprise Compliance Management Guidelines (Trial)" issued corporate compliance will gradually standardized, rule-based. As the use of commodity derivatives business, highlighting the importance of risk management, and other types of businesses have different characteristics in terms of compliance projects. So in the process of introducing enterprise risk management technology products, build hedging and risk management system, how to solve the problem of good compliance of it? This paper explores some.
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Commodity hedging business
And the level of compliance risk management,
Standard and focus
(A) compliance overall business can be divided into four levels
1. legal aspects: From a business point of view, mainly corporate and external social organizations, the relationship between the individual, the law is mandatory and must be strictly adhered to. The main business of the relevant laws, including the "Company Law", "Contract Law", "Accounting Law" and so on.
2. Regulatory levels: mainly business and higher administrative authorities (including external and internal), the relationship between the industry regulator, stakeholders or their agents institutions, mandatory strong, principled but there are also some flexibility sex.
3. Rules levels: mainly business relationships and operational requirements, mandatory stronger, must be strictly enforced, subject to administrative punishment in violation of the rules of general, financial penalties or compensation.
4. normative level: mainly business model, service model and enterprise management mode. Specification more instructive, companies have greater choice and their flexibility in implementation, but it is precisely the normative level in terms of business management, marketing, service, technology, innovation, competition, development arena. If an external guide specifications have special importance for an enterprise, an enterprise may be designated to the specification for the strict implementation of internal rules.
(Ii) corporate hedging and risk management compliance of the main criteria:
1. The Board of Trade of "derivatives trading rules" and OTC derivatives trading rules;
2. The Ministry of Finance issued the "No. 24 specific guidelines for Chinese Accounting Standards - hedge accounting" and association rules (No. 22 - Financial Instruments Recognition and Measurement, No. 23 - Transfer of Financial Assets, No. 37 - - financial instruments, No. 39 - measured at fair value);
3. "International Financial Reporting Standards 9 (IFRS 9) - Financial Instruments" or other similar rules (foreign companies);
4. "central corporate compliance management guidelines", "Central Enterprise Risk Management Guidelines", "COSO Enterprise Risk Management Framework" or similar specification.
It is worth mentioning that, in international commodity trade, we must abide by "international trade regulations" and "unified credit practice", which belongs to the category of international rules.
(3) The enterprise hedging and risk management compliance focus:
1. derivatives trading - trading purposes (hedging, arbitrage, speculation, basis), trading markets, trading tools, counterparties, transactions;
2. sets of - the nature and scope of the operation sleeve (sleeve and Non hedge hedge hedging), according to the qualitative or quantitative standard set of decision making (sleeve of the overall time frame, hedge ratio, timing and other operating conditions ), hedge accounting standards;
The implementation of regulatory requirements implementation, management practices selection and implementation, operation and internal rules and regulations of internal management systems - 3. Risk Management.
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Corporate hedging and risk management Compliance
The basic line
For compliance, the myth is easy to fall into a document-by-control compliance standards, to check, constraint management behavior of enterprises, departments, employees. In essence, compliance is a management process (cycle), may even need to go through a process of comprehensive reform. The basic route called compliance (guideline), is the main way to achieve compliance, including the establishment of compliance knowledge to make the necessary modification and adjustments on the business model of enterprises, establish more responsive to the compliance requirements of management, decision making, supervision system Wait.
Here we examine only two ways to improve the implementation and improvement of accounting standards set body of knowledge:
Improved (a) improving the knowledge system
The most important issue is compliance cognitive problems, need theoretical knowledge hedging and risk management, terminology concepts, methods, models, standardized rules, data resources, technology products, knowledge-based compliance management systems. Businesses often occurs in practice, internal, external parties who speak a different language professional, with a wide variety of methods, resulting in many misunderstandings, conflicts and lack of coordination, it would be difficult to achieve compliance.
1. Example: "Hedging four cardinal principles" is "hedging" how widespread, and have the effect of regulation (written in state-owned regulatory authority file). But a closer scrutiny, not difficult to find a set of logical principles is untenable. I looked at a lot of international academic and practical literature, standard terms are "hedging (Hedging)", and not "hedge" of fixed meaning, no "four cardinal principles," he said. I suggested that the principles and methods of hedging should be based on a new set of accounting standards in the "effectiveness of hedging" as the standard, should not use the "four cardinal principles Hedging"; standard term hedging is not You should use the "hedge" word, because it limits the method of hedging operations from the concept, but stressed that "hedge" type of hedging, to the exclusion of "non-hedging" hedging.
2. The two cases: the concept of "risk points" is used a lot of professionals, but the "risk points" lack of logical, comprehensive definition, classification and description of data, confusion in use. The concept of "exposure" more clearly, especially in terms of price risk of data can be described, become a standard terminology. Specifically, exposure to commodity price risk is the risk of containing stock, purchase and sales contracts, the number of buying and selling needs (plan) of (t, kg, etc.), as well as the duration of risk and other factors.
3. Example 3: "before, during, after the" concept of "things" usually refers to the signing of a contract, before the contract is signed beforehand, contract execution is something in the contract executed event of default or accident called afterwards. In fact, "before, during, and afterwards," the concept has considerable limitations. Risk management in practice, there are many risks, the risk of occurrence of each continued their aftermath node is not the time and contract operations, exactly the same period. Therefore, we need to risk by nature, the use of the concept of "exposure" is to describe, manage various types of risk, final results will be re-attributed to the risk carrier. In addition to the risk carrier under contract for the main business, buying and selling assets, and long-term demand for goods (plan) and so on.
Compliance is essential knowledge for enterprise risk management system construction and risk management practices, knowledge systems to be used as a unified, widely accepted norms and standards.
Execution (two) sets of accounting standards
Hedge accounting criteria are core standards compliance, we must not only clearly understand the meaning of all the articles, but also through the study and practice cases, the use of technology tools, settings management framework, and improve decision-making methods supervision mechanism, establish a support compliance operations good ecology.
In fact, the company's business, financial, risk management often will list a lot of practical operation compliance difficult problems, according to the author's experience, to effectively address these problems, we must look beyond the surface, grasp the principal contradiction, grasping the core elements to achieve the effect Gangjumuzhang.
1. The risk exposure: exposure to risk can be extracted from the carrier, its implementation of data management, risk assessment, hedging operations, measurement and recognition (financial accounting) and other operations. Exposure to not only solve the problem of the risk of a series of processing vector contains multiple components of risk, but also makes the cost accounting and fair value accounting go hand in hand on a risk carrier. Price risk exposure may be associated with " body separation" (ie commodities) to act as "hedged item", the initial value of zero at the start point of hedging operations (a date), which is in the process of hedging book value with changes in the market price of the benchmark change, and "body" can proceed with cost accounting, book value changes in hedging risk exposure after the end of the value attached to the "body."
2. Risk Management Framework: risk management framework called here, mainly refers to the time period enterprise risk management contained in the range of varieties and a number of constraints. Risk management framework to develop and oversee the implementation of corporate management or risk management committee.
The use of derivatives Forward contracts of speculative transactions, the corresponding spot if we can have long-term business needs, and within the established enterprise risk management periods of time, essentially in line with hedge accounting standards. Some derivatives of cross, cross-species (species downstream of the same chain) arbitrage operations, may be configured as a combined operation of the cash flow sleeve.
A different perspective, within the established enterprise risk management framework and meet the criteria for hedge some hedging operations, also essentially speculative nature of the operation, may directly generate spread income, and create value for the enterprise.
3. Supervision System: the development trend of international standards in risk management, risk management is a growing emphasis on respect for the decisions. Hedging operations should comply with the relevant rules and regulations of the enterprise, there are important operating companies authorized organizational matters should be based on written or authorized personnel decisions, which is an important aspect of compliance. In addition, the hedging operation shall record the complete documentation, including hedging basis for decision making, hedging strategies, hedge effectiveness, hedge impact assessment, in order to cooperate with the inspection afterwards, auditing oversight activities. For example, corporate decision-making committee may consider the risk value and the financial situation of a company hedged item, risk capacity, greatly reduce the hedge ratio, according to the results of the algorithm without the standard model of the "optimal hedge ratio" hedge , auditors should not be seen as a violation.
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Technology solutions
Compliance measures and design principles
(A) the main features of the software system CTRM point
1. spot and derivatives trading business integration management, adapt to "the current combination of" the way they operate;
2. "price risk exposure" in the data definition, the price of risk identification, assessment, response standardized;
3. hedging as the core, constructed "price risk management system", and can be extended to manage the four main risk of "integrated risk management system";
4. Market data and enterprise data integration, provides the necessary large data analysis and intelligent decision-making functions.
(B) CTRM software system should adopt the compliance measures and design principles
Industrial and commercial enterprises management information system solutions, must be based on common norms, standards for the design, innovation can not be arbitrary, can not be compliance, decision-making, supervision obstacle.
1. strictly related to the core business rules and norms as a basis for key management functions, processes, such as design;
2. as far as possible compatible with all compliance requirements, eliminate barriers to compliance operations;
3. Using Compliance management software and manual combination;
4. Application as the international standard of hedging and risk management and quantitative analysis, smart decision-making model;
5. Maintain openness and flexibility, and risk management decisions, compliance to provide a reasonable, comprehensive configuration and options;
6. Provide specific technical and functional channel channel, with the support of compliance review, operational audits, information disclosure and information sharing requirements.