Documente Academic
Documente Profesional
Documente Cultură
29114713
Hussein Al-Muhtadeebillah 29114737
Felix Terahadi
29114744
Rini Amelia
29114857
Hidratul Fidic D
29114859
Background
Grain Distribution
Volatile
Characterized by
boom and bust cycle
Variable supplies due
to natural forces
Regulations Created
to reduce fluctuations
Grain Distribution
In Canada, Farmers sold Board Grains to the
Canadian Wheat Board (CWB) to guarantee a floor
price
Grain Distributors like UGG were important
intermediaries between the farmers and the end
market
Farmers hauled their grain to grain elevators
and pays the handling fee
The Big Players: Saskatchewan Wheat Pool (30%),
Agricore (25%), and UGG (15%)
UGG Revenues from this service (1999): $19/ tons
from regulated and non-regulated grains
On site Risk
Brainstorming
Willis Attention
CHARM
CHARM (Comprehensive Holistic All Risk Model) generated graphical
output in several formats to highlight the various aspect of each
risk.
The most general format was a probability distribution showing the
probability of incurring a loss as a function of the size of the dollar
loss .
Cox had the information to do something to improve the firm's risk
management performance and potentially reduce UGG's long term
cost of risk
List of Risk
Business Interruption
Employee Liability
Employee Performance /
Fidelity
Process Compliance /
Execution
Civil Disturbance
Environmental
Product Liability
Foreign Exchange
Product Performance
Competition
Consumer Preferences
Industrial Espionage
R&D Ventures
Contractual no-Performance
Intellectual Property
Regulatory (CWB,
Transportation)
Credit / Receivables
Interest Rates
Counterparty
Inventory
Strategic Planning
Labor Strike
Data Accuracy
Transportation
Disease / Spoilage
Unionization
Weather
Employee Injury
Definition
Earning
s At
Risk
Method to Manage
Risk
Weather
11.5
None
Environmental
Liability
2.5
Insurance/control
Counterparty
Failure of Supplier
4.3
Diversification/due
diligence/contracts
Credit
Failure of Payment
1.6
Diversification/due
diligence/contracts
Inventory
Spoilage of inventory
2.2
Operational Control,
Insurance
Commodity
Fluctuation of Price
11.9
Risk Mitigation
Traditional methods
Retention
Continue operating as usual and not try to reduce
the weather exposure
Advantage
Disadvantage
No cost shifting
Weather Derivative
Arisk management strategy to reduce risk associated with
adverse or unexpected weather conditions
The variable to determine the payof
Failing
rains
during
the
growing
period
HDD
Excessiv
e rain
during
harvesti
ng
Heating
degree
day
option
CDD
High
winds in
case of
plantatio
ns
Cooling
degree
day
option
With derivative
contract, UGG will get
hedge when the index
is low