MANAGING PRICE VOLATILITY

Role of risk management in managing price volatility in the oil and gas market



Role of risk management in managing price volatility in the oil and gas market

Risk Management

The purpose of Risk Management is to control the major risks to a project, from preliminary studies preliminary design and detailed studies, implementation, testing, to deployment and into production or operation of the final product. Risks can be identified and analyzed from a classification of the major risk categories broken down into subcategories for each field of activity and / or profession. The Anglo-Saxons call it the RBS (Risk Breakdown Structure), i.e. decomposition by structured risk families and subfamilies. A monitoring and control must be implemented, including a measurement system and risk assessment. Bypass mechanisms designed to offset a problem with pragmatism. Crisis management, to provide an organization not to mention the disaster recovery and business continuity to design and implement, prevention appears to be an investment and low cost. (Johansen, 1988, pp. 231).

Risk Analysis

Risk analysis can be done by following a logical process starting with a phase identification and risk assessment and then manage them. c. to d. analyze and implement the actions of withdrawal, reduction to control the residual risks. Risks can be identified and analyzed from a classification table of the major risk categories broken down into subcategories for each field of activity and / or profession. The Anglo-Saxons call it the RBS (Risk Breakdown Structure), i.e. structured decomposition risk families by:

1.Strategic risks (associated with doing or not doing the project)

2.The risk decision making (decisions related to the project manager)

3.The industrial and commercial risks

4.The risks of R & D

5.Technological risks

6.Contractual risks

7.Financial risks

8.Political risks

9.Social risks

10.Normative and regulatory risks

Another approach is to analyze the types of risks throughout the project life cycle. For these first two phases, we will work from a checklist of known hazards and already identified by the organization on similar projects. New risks will be identified during brainstorming sessions with business experts concerned and dedicated to the identification and characterization of these new risks on the project. To determine the criticality of each risk, an assessment of the probability of occurrence and impact will be estimated. Criticality is the product of the probability of its occurrence by the impact that the risk on the project has seen the entire company. We then speak of criticality level is acceptable or not for the project is for the company. (Hwang, 1982, pp. 5).

Risk Identification

Risk denotes a concept that combines a specific adverse or harmful outcome of an action with the possibility of occurrence of this outcome. Risk identification will start with an analysis of what major societal actors (government, companies, the scientific community, NGOs, and the general public) define as areas of concern or impact that they regard as risks. There are two main obstacles in identifying possible hazards. The first is connected to the limitation of knowledge. In many cases the possible impacts (for instance, of new technologies) are simply not ...