Risk & Compliance
Risk management and compliance are fundamental pillars for Storm Energy to ensure our long-term success, resilience, and sustainability. In an industry characterized by volatile market conditions and strict regulatory oversight; effective risk management and adherence to compliance standards are paramount.
Storm Energy has put in place Trading and Compliance, Risk Management, and Credit Policies and Procedures, all of which are closely monitored and reviewed periodically.
Key aspects of our risk management and compliance include:
Market price risk
Price risk tools are deployed to ensure that we navigate price fluctuations and market uncertainties. We employ various strategies to address this risk effectively:
• Hedging: We engage in hedging activities, such as futures contracts, swaps, and options, to protect against adverse price movements and stabilize revenue streams.
• Diversification: We balance exposure to different oil products, geographical markets, and contract durations to reduce vulnerability to price fluctuations in a single market.
• Market Intelligence: We use comprehensive market analysis and up-to-date information to make informed trading decisions and identify potential price trends.
Credit Risk
Storm Energy monitors credit risk on an ongoing basis to ensure that counterparties’ exposure and limits is managed in a timely manner. Some key considerations to mitigate credit risk are:
• Credit Assessment: We thoroughly evaluate potential counterparties' creditworthiness, including financial health, market reputation, and credit history, and implement a consistent credit rating system.
• Clear Credit Terms: We define payment terms, credit limits, collateral requirements, and penalties in contractual agreements in a transparent manner.
• Diverse Counterparties: We supply from, and trade with multiple counterparties to spread our credit risk.
• Mitigation Tools: We mitigate credit risk through utilization of letters of credit issued by first-class international banks, bank guarantees, or credit risk coverage through banking/insurance markets.
• Ongoing Review: We regularly assess and update credit risk management strategies to stay aligned with industry best practices.
By prioritising credit risk management, Storm Energy safeguards its financial interests, minimizes issues, and builds trust among its stakeholders.
Operational Risk
Operational risks include a variety of factors such as logistical challenges, supply chain disruptions, equipment failure, and accidents. Storm Energy manages operational risks through:
• Robust Risk Assessment: We conduct regular risk assessments to identify potential hazards and vulnerabilities within our operations, enabling proactive risk mitigation.
• Contingency Planning: We develop detailed contingency plans to address unforeseen events, ensuring minimal disruption to operations and timely response to emergencies.
• Insurance Coverage: We secure appropriate insurance coverage, such as marine and goods-in-transit insurance, to alleviate potential financial losses associated with operational risks.
Foreign Exchange Risk
Foreign exchange (forex) risk arises due to currency fluctuations, which can significantly impact the profitability of international transactions. We manage forex risk through:
• Currency Hedging: We use hedging instruments such as forward contracts and currency options to protect against adverse exchange rate movements and minimize currency-related losses.
• Netting and Clearing: We centralize transactions and settlements to offset currency exposures, reducing overall forex risk exposure.
• Cash Flow Management: We maintain robust cash flow management practices to ensure timely conversions of foreign currencies and minimize exposure to adverse exchange rate fluctuations.
Regulatory Requirements
At Storm Energy, compliance with regulatory requirements is essential to maintain our integrity, reputation, and legal standing.
Any counterparty seeking to interact with us must complete our extensive Know Your Customer (KYC) process and must be approved.
Storm Energy has an extensive compliance function including board compliance, committees, and regular compliance reviews. The objectives of such a function are to:
• Identify our business partners to reduce and eliminate associated risks.
• Identify the types of risk, such as reputational risk, risk of money laundering or terrorist financing.
• Our background checks include searches to identify any negative news, sanctions, or associations with Politically Exposed Persons (PEPs).
Key compliance measures
Regulatory Knowledge
We keep updated with relevant laws, regulations, and industry standards to ensure full compliance at all levels of operation.
Internal Controls
We establish comprehensive internal control systems to monitor and enforce compliance with regulations including transaction reporting, record-keeping, and data protection measures.
Audit and Review
We conduct regular internal and external audits to assess compliance, identify areas for improvement, and rectify any non-compliance issues promptly.
Software
We use "World Check", a global database of Politically Exposed Persons and heightened risk individuals and organizations, to identify and manage financial, regulatory, and reputational risk. Once a business partner has been KYC approved, we continually monitor their status and send automated notifications on any changes.
ESG
At Storm Energy, we are committed to the principles of Environmental, Social, and Governance (ESG).
ESG is an integral part of our operations as it contributes to sustainable business practices and responsible corporate citizenship. These include:
• Health and Safety: Keeping our operations, clients, employees, contractors, and communities safe.
• Environment: Minimizing impact on the natural environment.
• Society: Being a positive presence in the communities where we operate and respecting the internationally recognized human rights of our employees, contractors, and those working in our supply chain.
• Governance: Upholding high standards of transparency and corporate governance, and combat bribery and corruption with our business partners across our business.