Management of market and credit risks at EGL, as well as company-wide corporate risk management, are the responsibility of a central department, Group Risk Management, headed by the Chief Risk Officer. This ensures that the detailed perspective at transaction and book level and the overarching company perspective are consolidated to obtain a reliable and consistent big picture of the risks. Risk management is based on the EGL Risk Management Manual, which has been approved by the Board of Directors and defines objectives, organisation, methods and tools as well as processes.
In energy trading, systematic management and monitoring of market and credit risks is particularly important. The key is a comprehensive, company-wide limit system that sets company-wide credit limits for all trading partners as well as limits on volumes, sensitivities, value-at-risk and contract terms at the portfolio level. The limits, requirements and directives of Group Risk Management must be observed by all operating units. The purpose of the limit system is to control sensitive risks centrally, while giving traders clearly defined, transparent scope to implement their trading strategies. Trading strategies are outlined in books (portfolios) with clearly defined responsibilities. Every trader can buy and sell within the defined limits of his or her trading book. Book performance is measured on a daily basis and compliance with the limits is monitored.
In addition to market and credit risks, corporate risk management also systematically records, evaluates, controls and monitors operational and regulatory risks. The departments and subsidiaries are responsible for their own risks in accordance with the risk owner principle, and support for risk analysis and strategic planning is provided by the central corporate risk management team which submits regular reports to the Executive Board, the Risk Council and the Board of Directors.
