Risk Management Advisory Case Study

The Challenge: Our client, an import dependant national oil company, faced substantial difficulties after entering a number of loss making derivative oil market transactions with several large financial institutions. The size of the losses put the management within the client company under substantial political, legal and financial pressure. This was further compounded by the fact that the client company did not fully understand the complex financial instruments which they had traded.

The Solution: By working closely with the client company and its management JBC was able to breakdown each of the deals entered by the client thereby providing greater understanding of the company’s position. Furthermore, JBC was able to provide the client with advice and insight on how to trade in complex financial instruments such as options and advise on how these instruments can have serious negative impacts on the company if not fully understood.

Our Approach : In this engagement JBC needed to fully understand the client’s physical and paper market portfolio to understand its ultimate position and exposures. Once these positions were understood, we went tackled the task of communicating our findings to the client. This was done in series of reports and presentations by the company’s most senior consultants.

The Outcome: Unfortunately, not all outcomes are 100% positive. JBC was not able to save the company from the losses incurred prior to our engagement. Nevertheless, thanks to our advice the company better understands the complexities of trading sophisticated derivative instruments and has adopted a more risk appropriate strategy that will save it from making similar mistakes in the future.