Enterprise risk management

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Our approach

Vitol adopts a careful and considered approach to risk management

We split risks into the five main categories described in the table below. A number of functions exist in Vitol to mitigate these risks. The heads of these functions report directly to a Board member and provide quarterly updates at Board meetings. Environmental and Social risks can occur across strategic, hazard and operational risk categories. ESG controls are embedded across Vitol, as appropriate, to control these risks.

Vitol believes its ownership structure encourages a long-term outlook and that the proprietary systems which underpin the business and are developed and built in its Geneva hub, enable it to manage enterprise and market risk across its global operations.

Creating a resilient environment is vital in mitigating risk across these five main categories. The cyber security programme’s objectives are to protect Vitol and facilitate new opportunities, while reducing the risk of exposure to cyber-attacks or data privacy incidents. The cyber strategy is driven by industry best practice objectives of Confidentiality, Integrity and Availability, delivered via the three pillars of governance, technology and employees. The management of cyber risk is led by the Head of Cybersecurity (CISO) who presents metrics on exposure and consolidation every quarter to the Board. The programme covers not only Vitol cyber risks but also supply chain and third party risk management.

Strategic and marketplace risk Potential negative impacts on Vitol resulting from external factors impacting overall strategy and competitive environment These risks include:

  • Talent risk, which can arise due to employee attrition or a skills gap;
  • Margin and volume risk, from price volatility or fluctuating demand;
  • Joint venture risk, which may stem from conflicting goals or cultural differences;
  • Sanctions risk, resulting from trade restrictions or financial penalties;
  • Business continuity risk, occurs when there is a natural disaster or supply chain disruption;
  • Competition risk, which may include price wars or lost market share;
  • Technology risk, arise due to cyber attacks or data breaches; and
  • Reputational risk, from negative publicity or counterparty complaints
Hazard risks Potential harm or damage to people, property, or the environment resulting from natural disasters, accidents, or other unforeseen events Hazard risks are split into:

  • Regulatory risk, which may arise from changes in laws or regulations, which could impair Vitol’s ability to operate or comply with relevant standards and
  • Environmental risk, which may stem from pollution, natural disasters, or other environmental factors that can harm Vitol’s assets, operations or reputation
Operational risks Potential losses or disruptions resulting from internal processes, systems, human error, or external events beyond Vitol’s control Operational risks can have significant negative impacts on Vitol operations including:

  • Storage and freight risk, which refers to the possibility of loss or damage of goods during transportation and warehousing;
  • Inflation risk, unexpected increase in expenses and operating costs;
  • Control failure risk, could occur when there is a failure to enforce policies and regulations leading to non-compliance and potential legal repercussions;
  • Fraud and corruption risk, involves individuals engaging in intentional deception or dishonesty for personal gain; and
  • Litigation risk, stems from exposure of Vitol to legal action or lawsuits
Financial risks Potential losses or negative impacts on a company’s financial position resulting from fluctuations in financial markets, interest rates, credit ratings, or other financial factors Financial risks include:

  • Country risk, i.e. political and economic instability in a country;
  • Counterparty risk, arises from the risk of default or non-payment by a business partner;
  • Liquidity/cash risk, threat from insufficient cash or liquidity to meet financial obligations,
  • Currency exchange risk, involves fluctuations in exchange rates that can result in significant financial losses;
  • Interest rate risk, arise due to changes in interest rates, which could impact profitability and financial stability; and
  • Insurance coverage risk, refers to the risk of inadequate or loss of insurance coverage
Transactional risks Potential financial loss resulting from errors, fraud, or other issues that may arise during a transaction or business deal Transactional risks are those associated with day-to-day operations such as:

  • Trading strategy risk, result from potential losses due to poor trading strategies;
  • Sourcing risk, stem from poor supplier selection or performance;
  • Price risk, arises from fluctuating commodity prices;
  • Basis risk, occurs when there is a discrepancy between related commodity prices;
  • Structural risk, arises from changes in the market structure,
  • Market liquidity risk, arises due to a lack of liquidity; and
  • Rogue trader risk, associated with fraudulent trading activities by an individual