1. Individuelle Kennzeichnung / Datum
Risk Management @ Royal Dutch
Shell Plc.
Jenny Yu-Chun Liu
Judy Tsai-Yeh Wu
Hajer Ben Mariem
2. Individuelle Kennzeichnung / Datum
Agenda
● Introduction to Royal Dutch Shell Plc.
● Risk categories and sources
● Risk management of Royal Dutch Shell Plc.
● Evaluation
3. Individuelle Kennzeichnung / Datum
Royal Dutch Shell Plc
an Anglo–Dutch multinational oil and gas company headquartered
in the Netherlands and incorporated in the United Kingdom.
• Created by the merger of Royal Dutch Petroleum and UK-based
Shell Transport & Trading
• as of 2014 it is the fourth largest company in the world, in
terms of revenue
• one of the six oil and gas "supermajors".
6. Individuelle Kennzeichnung / Datum
Compliance
to treasury
standards
Foreign
exchange,
Interest Credit
Financial
insurance
Derivatives
Valuation model of derivatives excludes special cases, e.g. subsidies to energy
7. Individuelle Kennzeichnung / Datum
Risks classification
Financial risks
• Capital market risk
• Credit risk
• Market risk
• Interest rate risk
• Foreign exchange risk
• Price risk
• Liquidity risk
Other risks
• Country risk
• Health , safety,security and environmental risk
• Political risk
• Property and liability risk
8. Individuelle Kennzeichnung / Datum
Source of risk Risk management
Credit risk
When the counter party fails to repay on the due
date
Guideline: quickly react to worsening
credit
Well-defined easing measures
shorten payment period→ shorten
exposure period
post collaterals←→take collaterals
• vigorous collections &
monitoring partners
• Volume limits on
counterparty tradings
• Commodity counterparty:
individual credit limits with netting
method adopted (reduce
transaction risks)
10. Individuelle Kennzeichnung / Datum
Foreign exchange risk :
Shell is mostly dependant on the US dollar
currency which is its major functionnal
curreny.
The fact of being global arises Shell’s
exposure to this risk
• Regional treasury centers: daily
coordination of net postition of each
currency for the WHOLE ENTITY
• Exposure reduction
• Swaps: for debts due to flows of
money; into USD denominated
• Forward contracts: ONE certain
amount at once
Interest rate risk : dependant on dollar
LIBOR interest rate movments
• Swap: for LT debts (>1 yr); receive
floating and pay fixed
Price risk : highly exposed to the
fluctuations of commodities prices : crude
oil ,natural gas , electrical power….
• Risk exposure → Daily VaR (Monte
Carlo) & Trading limits
11. Individuelle Kennzeichnung / Datum
Liquidity risk :
the inability to get
suitable sources to fund
the company’s
operations.
• Liquidity sources: operations or external debt
issuance
• External debts: Commercial papers, Euro
Medium-Term Note (5-10 yrs), US universal
shelf registration (easier shares, debt securities,
warrant and preference shares issuance)
• Maintain good credit rating for lower rate
• Managing repayment: special commercial
papers for internal funds → credit line for Shell
• Financial crisis→ stock price → value of
pension asset → extra cash contribution →
liquidity
12. Individuelle Kennzeichnung / Datum
Health, Safety, Security and
Environmental (HSSE) risk :
this risk threatens shell’s emloyees
and covers also the natural and
environmental hazards
• Systematically handling → CSR
committee: standards and assessment
• Road accidents → standard road
safety program
• Fuel-saving driving habit
• More operational expences for
safely disposing wastes
• Low CO2 bio fuels production
13. Individuelle Kennzeichnung / Datum
Total
2.28
1.69
2.72
3.31
0.0455
0.188
0.6544
1.8096
0
0.3164
0.2292
0.1094
0
1
2
3
4
5
6
Exxon BP TOTAL SA SHELL
Comparison of some risk parameters
between Shell and its competitors
Value at risk Market sensitivity risk adjusted performance
Source : http://www.macroaxis.com/
