Risk & opportunity oversight

At Mercuria, we recognize that managing risk and identifying opportunities are essential components of achieving our sustainability goals and creating long-term value for our stakeholders.

In this section, we provide an overview of our approach to risk and opportunity management, including how we define risk and opportunity, their impacts on our business, the different types of risks and opportunities we manage, and the role of our risk management teams.

We define risk as the potential for adverse effects on our business, including financial, reputational, and operational risks. Conversely, opportunity is defined as the potential for positive effects on our business, including financial gain, increased efficiency, and innovation. We recognize that risks and opportunities are interrelated, and we actively seek to identify and manage them in a holistic manner.

Managing risk and identifying opportunities are crucial for the success and sustainability of our business. Unmanaged risks can result in financial losses, reputational damage, and legal liability, while missed opportunities can lead to lost revenue and competitive disadvantage. By effectively managing risks and identifying opportunities, we aim to mitigate potential losses and create long-term value for our stakeholders.

At Mercuria, we are exposed to and have to manage a wide range of risks and opportunities, including but not limited to:

  • Climate change risk: risks associated with climate change which in themselves could be physical, i.e. directly or indirectly resulting from chronic or acute weather events (eg temperature changes, wildfires or sea-level rises) – or transitional, i.e. impacts as a result of the energy transition such as new or altered policy or regulation, technology developments or changes in consumer preferences.
  • Compliance Risk:  also known as integrity risk, this is the risk of failing to comply with industry laws and regulations, internal policies or prescribed best practices.
  • Credit Risk: risks associated with the potential for default by borrowers or counterparties.
  • Environmental, Social, and Governance (ESG) Risk: risks associated with the impact of our business practices on the environment, society, and governance practices.
  • Market Risk: risks associated with changes in market conditions, including interest rates, foreign exchange rates, and asset prices.
  • Operational Risk: risks associated with the effectiveness and efficiency of our internal processes, systems, and controls.
  • Reputational Risk: risks associated with negative public perception of our business practices and reputation.

The risk management function provides independent oversight and as such it is important that they work effectively with the management team, trading desks, investments teams, technology department at all of our locations. To reinforce the risk processes and ensure this collaboration, risk management is embedded into businesses across the organization.

Our dedicated risk management teams work closely with our business units to identify, assess, and manage risks and opportunities. Our risk management teams are responsible for developing risk management strategies, implementing risk management policies and procedures, and monitoring and reporting on risk exposures.

We take a proactive and integrated approach to risk and opportunity management. Our commitment to risk and opportunity management is integral to our overall sustainability strategy and is an essential component of our responsible business practices. We believe that by effectively managing risks and identifying opportunities, we can create long-term value for our stakeholders and contribute to a more sustainable future.

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