Enterprise-wide risk management: The power of cashflow-based metrics

The risks faced by energy/commodity firms need to be assessed via metrics that allow for longer-term outlooks and incorporate risks from asset-backed trading. In the second article in this series, Chris Strickland discusses the range of such metrics available to energy risk managers

The power of cashflow-based metrics

In our previous article on risk management reporting we focused on value-at-risk, the risk metric that anecdotal evidence and recent surveys suggest is the staple metric for most firms. However, we pointed to the fact that, in practice, VAR is often limited to (and useful for) only part of a firm’s activities, and should be reassessed with respect to the alternatives that are available to determine the risks faced by energy companies at the enterprise level.

Enterprise-wide risk management can

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