The “whats”, “hows” and “whos” should be laid down in a robust framework of policies, procedures and systems.
- Control begins with oversight and guidance. The problem for most executive management is that plates are full and schedules tight so price risk management doesn’t even hit their scope. A Risk Committee, composed of multi-disciplined managers drawn from relevant departments is a widespread solution. In addition to offering guidance, the cross-pollination and cross-functional understanding distilled there will help establish a common risk agenda and boost company wide awareness.
- Control requires risks and their interrelationships are planned for. Customer credit difficulties, delayed or damaged shipments or even strikes at production facilities can have very real impacts on your price risk management. Policies and control procedures should allow for such cross-over events and contingencies anticipated.
- Control is facilitated by systems. A well designed front-back office system is one that assists company-wide risk management control efforts. In addition to covering reporting needs, is yours assisting with duty segregation, monitoring limits and assuring double checks and sign offs are completed?
- Control is a moving target. Control must evolve to meet the needs of a developing business. An iterative and visible development process and a culture that celebrates opportunities for improvement is critical to keep control for price risk management on track.