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Strategy and performance Risk and market compliance

As Olam has grown, the Risk Function has continued to strengthen its presence, partnering with the Business Units to facilitate the Company’s strategy, independently identifying, measuring and mitigating risk. We control the terms on which risks are taken and employ effective risk management strategies to enhance the overall risk‑return profile of the business.

Risk governance at Olam

Risk governance is a central pillar of our risk framework that facilitates the execution of our strategy within the context of risk appetite versus return. In partnership with the relevant risk stakeholders, calibration of risk is a continual process and limits are dynamically managed as the needs of the business determine.

RiskGovernanceAtOlam

Risk measurement

Olam continually upgrades its risk measurement methodology in line with industry best practice. We focus on the measurement of quantity, dollar value, VaR and stress testing to determine potential impact of adverse market events on the books. Analysis of return drivers provides a clear attribution of returns against risk, and allows an independent flagging of outsized or undesired risk.

RiskMeasurementAtOlam

Corporate governance

Olam has in place a robust governance framework to support the continual pursuit of risk mitigation. Coupled with our strong risk culture, this acts as an enabler in support of the overall risk process. Every risk is within a defined risk appetite and is approved within the mandated risk framework.

The Board Risk Committee (BRC), made‑up of Executive and Non‑Executive Directors, is the most senior risk body in Olam. It determines the overall risk capital and VaR and approves risk policies and governance.

The Chief Risk and Compliance Officer (CRCO) reports to both the Group CEO and BRC and is mandated to allocate the risk capital across our Business Units taking into account the competitive position, trading and market conditions and the track record of each business. Performance is continuously monitored and risk capital allocation is recalibrated where necessary.

The Executive Risk Committee (ERC) is made up of Senior Management, and supports the risk governance process by promoting risk culture, approving large exposures and mediating large breaches.

Enterprise Risk Framework

Our Enterprise Risk Framework captures all categories of risk into a comprehensive scorecard. The scorecard maps the likelihood of key risks materialising along with their impacts. The scorecard serves as a tool for highlighting the significant risks which require mitigation actions. The findings from the scorecard are presented to senior management and the BRC.

Risk training and communication

Risk Office frequently presents to Olam’s top‑most management bodies including the Executive Committee (ExCo) and the Operating Committee (OpCo) to enable strengthening of the control environment. During 2015, there has been continued education and development of Olam’s Escalation Policy, New Product Approval and Drawdown Policy in order to continually upgrade and align risk awareness and culture across the firm.

Risk monitoring across Olam Value Chain

Our mapping of risks across the Olam Value Chain has identified the specific risks at each stage. Olam seeks to identify, measure and control the drivers of risk from upstream risks such as yield and input costs, to credit and counterparty in the supply chain and trading, downstream and non‑trading exposures:

Upstream Supply
chain
Midstream Supply
chain
Downstream
Risk
category
Risk
factor
Plantation Origination Refining and
processing
Trading and
logistics
Downstream
Market risk Outright x x x x
Basis x x x
Structure x x
Agronomic Yield x
Quality x
Input cost x
Geographic Legal x x x
Regulatory x x x x
Tax x x x
Duty structure x x x
Currency x x x x x
Market compliance x x
Asset Utilisation x x x
Efficiency x x x
Counterparty Counterparty x x x
Credit x x x
Documentation x x x
Stock Liquidity x x x x
Quality x x x x

Risk advisories

From time‑to‑time the Risk Office publishes risk advisories on pertinent matters pertaining to potential control gaps business. Topics covered during 2015 have covered various topics relating to the supply chain and risk measurement.

Market compliance controls

Complying with the highest standards of business conduct is a top priority for Olam. The Market Compliance Office (MCO) is responsible for ensuring regulatory compliance for the Company’s derivative trading units, carries out regular trader training courses to ensure familiarity with prevailing exchange rules globally and ensures that all new hires are comprehensively trained in Olam’s Trading Compliance Manual.

SixPillarsfForEffectiveManagementOfRegulatoryRisk