Managing financial risk

Extractive and power companies are cyclical businesses driven by commodity price fluctuations. Highly publicised business failures are requiring companies in this sector to establish and strengthen financial, trading and risk management capabilities. Methods for measuring market and credit risk must better reflect a company's business portfolio, as these companies are significant investors, borrowers or users of derivatives.

External oversight bodies are requiring more rigorous financial disclosure and demonstration of robust corporate governance policies and practices. Executives face increasingly sophisticated cash management solutions driven by technology and opening markets, as well as complex tax and funding structures requiring careful management of cash flow within the company.

There is increasing pressure on financial officers to demonstrate that risk identification and financial management are grounded in timely, accurate forecast and performance data on which top management can base strategic decisions. Review of existing financial and risk reporting and mapping of financial systems and data within both the finance and treasury functions can identify opportunities for process automation and synergies, encourage consistency of data and identify areas for control enhancements.

How PwC can help you

We assist energy, utilities and mining clients in developing a disciplined risk management governance framework that will enable them to meet performance and risk objectives, resolve uncertainty and achieve their financial goals. Using proprietary methodologies, we help clients:

• Analyse risk valuation and measurement methodologies
• Evaluate operational and risk management processes and controls
• Benchmark trading and marketing activities against industry best practice
• Design, select and test analytic tools for price forecasting, asset modelling, etc
• Build a best in class corporate governance framework to manage financial risks
• Communicate financial management policies and procedures to a wide stakeholder group, including members of the board, investors, analysts and regulators