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Lead: how to promote to improve the overall risk control capability and thus help the “bigger
guests | Founder Products Group Limited risk control director Zhang to Xuan reprint please contact the poker author Jun (ID: puoker) Authorization Interview background:
“bigger and stronger” is the common goal of state-owned private enterprises.
If the “big” means that these large companies occupy in the economic lifeline of the national economy and the status, then the “strong” refers to must be in the economic situation in the whole complex of the ability to “anti-risk”!
risk often comes from two parts, one is the risk of intense game between the economies outside the country brings.
Also part of the risk, comes from their own for the entire internal risk management processes to control.
When the distance vision match the size of strength.
Large enterprises if there is enough confidence in their own ability to control the wind?
The reality is, the ability to control the wind and current situation of domestic enterprises, domestic yet have not done a comprehensive analysis of an organization and analysis, let alone push to improve the overall risk control capability and thus help the “bigger and stronger”?
Poker Finance to focus on information services and the bulk of the financial sector entities, for the bulk of this international field of strong property has accumulated more complete, willing and able to do work in all organizations to risk control
carding and analysis capabilities.
poker hand in CME Chicago Business Finance jointly organized “2017 China Enterprise Risk Management Forum”, do promote Chinese enterprises to enhance their ability to control the wind pioneer.
Poker Finance promised, will be an interview, special and other forms of coverage and publicity for the show with these large financial sector “wind control business models.”
Now is our time to keep his promise.
In this interview in, Founder Products Group Limited risk control director Zhang to Xuan combined Founder property multi-annual financial combination of market experience, detailing the investment research Founder property in management
development characteristics and advantages of experience, and risk management.
PUOKE Interview About Us
Founder Products Group Ltd. (hereinafter referred to as “Founder property”)
Over the years a good business reputation of the industry and the concept of the times, living in the commodities industry leading position.
Founded 16 years ago, the company’s average annual revenue growth rate remained above 30% success among the one hundred billion club.
Meanwhile, Founder property always adhere to the strategic development of ideas spot trade and finance combination of risk control important component of a business strategy, since 2004 to get involved in the commodity business since, risk control system on
will build, was born.
Today, it has developed into a trading and investment in one of the international commodity supply chain service provider for upstream and downstream customers to provide integrated supply chain services and risk solutions in the investment research and trading risk management, great to learn from
Founder property is a subsidiary of Founder Group, is one of five major industry groups, the main business scope of commodity spot trading, warehousing and logistics services as well as investment and production, business types
the covered commodity metal mining, energy and chemical, agricultural products and other raw materials, industrial products, give full play to the advantages of large state-owned enterprises, trading operations through practical business research and specification, to ensure sustainable development in the industry.
full interview with:
with the business at the same time the birth of the Combination to create a closed loop air control system
Recalling the Founder of the property risk control
management history, due to the special nature of the bulk of the industry, to get involved in large business at the beginning, we had begun to build a risk control system.
The combination of traditional industries and finance, both spot and futures trading business, focusing on the actual needs of the business, and gradually improve, creating a closed loop air control system, especially in terms of credit evaluation system, Founder property always at the forefront of the industry, operating results significantly.
➤ Poker Finance: Would you please talk about the history of the Founder property risk management How long?
to Zhang Xuan: My company is Founder Products Group, Founder Group is engaged in commodities trading business, industry groups.
Since the commodities involved in business since 2004, we began to build the entire system of risk control.
In fact because of the special nature of commodities trading business itself is to create value through the “risk management” can be said, the Founder of the property risk management and business development are attendant.
➤ Poker Finance: In the process of risk management, understand the risks and how to manage?
Zhang in Xuan: First of all, because we are engaged in commodities trading business, and on commodities trading is essentially a risk management business process, is to explore the market
unreasonable base spread or difference, or find irrational market pricing between a number of related species in order to determine the timing of entering transactions, and waiting for prices to eventually return, profit.
Based on industry background, combined with statistical regularity, this return to the big probability will happen, but also because of the interference of external factors, whether it is “Black Swan” or “gray rhinoceros”, it is also possible from the statistics
Finally, the risk becomes uncontrollable.
And we actually rely on effective risk management markets, so as to obtain benefits.
Therefore, in this sense, it is our own risk managers in the field of commodities trading, risk management or service provider on the commodity chain.
On the other hand, as in the ordinary sense of the risk management, property Founder also built a sound risk management system, through the Risk Management Department, Ministry of Justice, Ministry of Finance management, financial management and other related departments, respectively
undertake specific types of work, including the internal risk control operational risk, credit risk, in-kind goods right risk management, market risks, financial risks and other funds.
Partner Risk Management departments both business units, as well as practitioners and boost the company’s management and control.
➤ Poker Finance: You just mentioned, the main job of the property Founder commodities trading, but also mentioned that business was born in the beginning to build risk management, risk management system in the building
when, if there are other reasons drive?
Zhang in Xuan: is mainly these aspects: First, commodity sectors affected by the economic impact of global macro politics is very large, market risks faced by also than the traditional
industry is more complex.
Second, from the entire industry, commodity industry involves many customers upstream and downstream industry chain, then, different customers, credit status differences will be larger, will be more big risks
, there is a need for careful assessment.
Third, the commodity has a strong financial attributes, our business model is also involved in futures, options, forwards, swaps and other financial derivatives, but also need to consider exchange rates, interest rates and other factors
, so we need to effectively manage the risk of the transaction itself.
Fourth, our business is a capital-intensive business, using the scale of funds is usually relatively large, if the lack of risk management and control, it could result in huge losses.
Based on the reasons above four aspects, before we design a good trading strategy, we need to consider what the risks will be good to deal with, which means taking risk management and control and so on.
Therefore, risk management must be carried out with respect to the front of the business, or at least in parallel.
➤ Poker Finance: Founder property is how to develop, improve, and ultimately to establish a more mature risk management system it?
Zhang in Xuan: Because our business involves both spot trade, also involves futures based financial derivatives trading, on the basis of a combination of both on business
mode escalation and evolution.
Thus when to build risk control system, you need to take into account the characteristics of these two types of business, and reflect individual needs, as well as the need to upgrade the business model and continuous improvement.
from example to illustrate several aspects.
in the spot trade, we combine the characteristics of commodity sectors, creating a property Founder Credit Management System.
The system matches the height of the chain business, credit management and form a closed loop.
In spot trading, as the regulatory authority of the goods is also very important, so we built a logistics service provider management system, through this system clear the access mechanism logistics service providers, the size of cargo storage
the means of control limits, as well as regulatory and inventory and other goods.
Through the implementation of the system, help reduce the risk of loss of goods and the goods right out of control.
In the futures and other financial derivatives trading, we will risk control strategy elements into the design itself go, and in order to wash away some of the market risk.
While in the process of execution of the transaction, we will learn from some of the company’s financial practices, introduce some financial risk control model or tool, the progressive realization of quantitative trading risks.
also established internal control system, from process system includes some means of information technology, be able to set some of the risk assessment, identification, control measures.
There are specific risk management modules, such as: the right goods risk management module; primarily related to the project from the business to the trading transaction management module; customer credit management module; specialized legal risk by the Ministry of Justice to undertake and
contract risk module; others, as well as the financial resources to these specific undertaking by the financial sector, financial sector and to develop risk response module and other instruments.
It is in the property Founder stop practice, review and improve the process, and gradually established a set of now, have their own characteristics, their counterparts in the risk management system management module.
➤ Poker Finance: You mentioned the issue of the credit assessment of the upstream and downstream in the front, in this regard, Founder property is not there a framework it?
to Zhang Xuan: Yes, yes, in this regard, we have done a lot to communicate with peers, since that do quite leading, sound
As far as I understand it, many companies within the industry practice is to purchase through third-party services or information services to some reports as a basis for credit assessment itself does not establish an independent monitoring system to assess the credit.
We are from the beginning more emphasis on this aspect, very early start for each business line, to build a credit evaluation model.
In this model, each dimension will consider counterparty, such as industrial and commercial information, business indicators, performance record, collateral situation, several indicators of public opinion, etc., make up a relatively sound credit evaluation system.
Through this evaluation system can be relatively scientific assessment of the customer’s credit status, to determine what policy to take credit support.
Of course, we will also work with third-party credit counseling agency, but only to their data as a reference, or as a one dimensional evaluation system.
In the course of business execution, we will promptly by the business sector, the financial sector to obtain the corresponding data, timely implementation of dynamic monitoring, control credit exposure conditions.
In this process, we will observe a potential risk outside the expected or does not appear, it is our credit system monitoring.
In the back-end business, once a triggering event of default of credit, we will take appropriate measures, such as the implementation of a credit warning, and so start receivables collection, but also according to the customer’s performance
and promptly update the customer’s credit assessment, if necessary, will be optimized evaluation model.
All of the above, the whole forming a closed-loop management system of credit.
➤ Poker Finance: now, how the existing risk management system to run this effect?
to Zhang Xuan: It should be said to be very effective.
In fact, we are doing such a system, when more attention is combined with the actual needs of business, less the pursuit to create one kind of stay in the “Risk Management Manual” large and very sound, or on the surface, but actually
during operation and no landing system.
2014 – between 2016 commodity industry experienced a severe test, after another incident a number of risks, many colleagues suffered a great loss.
We at this stage, with professional judgment business units, the company relies on a sound risk management system, to achieve a sound business.
to this point may be a few examples to illustrate.
For example, in 2016, foreign exchange risk concentrated outbreak, the sharp appreciation of the dollar, was beyond all expectations.
Some colleagues may not have time to do in the foreign exchange hedging products in this area, or do backwards, eventually led to large losses.
However, we operate through the mechanism of foreign exchange and Exchange Commission, identified in advance to this risk, the ultimate success of a circumvention, not only that, also derive a certain amount of revenue.
In addition, besides the risk of spot trading, a few years ago after another outbreak of risk events copper trade, steel trade risk events.
We ferrous and nonferrous metals business, business scale is large, but not involved, mainly due to we have better logistics risk control system, credit risk management systems.
➤ Poker Finance: now, the performance targets in the first half of 2017 was not reached?
to Zhang Xuan: can be said that the completion of the well, is over-done.
➤ Poker Finance: Risk Management so big contribution to reach the goal?
to Zhang Xuan: must be very large.
In fact, from the beginning of 2016, we have proposed a zero-risk target or vision, summarized in the last year, we achieved that goal of zero risk to the true sense.
Last year, as far as we know, there were many within the peer is risk event, which is from 2014, extending the results of 2015, that is indeed the case a few years the bulk of the industry is relatively poor.
When we do sum up at the end of 2015, for 2016, it is set up in such a direction, to take a more rigorous risk control policy.
So, in 2016, we basically do not have any risk events.
2017, we continue to follow the policy for 16 years, to ensure the smooth running of the business, based on the attention the opportunity to earn more profits, date, and no major risk events, and ultimately support the business smoothly
In fact, the bulk of the industry, once a big risk of a two bigger business mistake, may more than a billion of funds, look no earnings years will go down the drain, some of
listed companies and even some central level, have similar things happen.
So, for risk management, to take it seriously.
In fact, the bulk of the industry, if it is extensive, it is three.
First, funds, either through its own funds or financing or other means, to get enough money, because it is capital-intensive.
Second, the business, have a relatively unique business strategy, trading strategy, business model, ahead of others in order to find some trading opportunities Once you have them.
Third is risk control.
This is equivalent to a three content triangle, only these three do bits, in order to realize the true sense of strong revenue, these three are indispensable.
So, to ask for contributions to risk control business so big, I think it is very large, especially the commodity industry.
three defense of multi-level communication project to determine whether the business model execution
participation commodities industry, particularly in futures trading, a complete set of system security, risk control management, approval process
It can be described as critical.
2016 foreign exchange risk concentrated outbreak, many companies suffered heavy losses, but by flattening Founder property management, three air defense control, three-level communication mechanism, effective risk management, approval process, in 2016, the real meaning
the realization of the business, vision zero risk trading!
“control in any sense should be a closed-loop process”, in an interview, Zhang Yu Xuan says.
➤ Poker Finance: risk control team currently how many people?
to Zhang Xuan: is such that the average company to talk about risk control, may have been Jidao defense, for us, is the same.
From a business point of view, they are the first line of defense, the second is the risk management team of professionals and, finally, auditing and internal control of the defense.
If we take the first line of defense and the third line of defense removed, said a separate risk control team, which is the risk management department established for this purpose, there are about the size of 40 people.
The main work of the Risk Management Department, is to manage risk spot and futures end said earlier.
➤ Poker Finance: now the Group’s risk management model is biased in favor of centralized or decentralized management of each subsidiary to manage?
Zhang in Xuan: In fact, we are a flat management style, first of all we have the whole wind control is a centralized management approach, but for the individual business segments, each
business units, there will be counterpart personnel to work with us to do this.
➤ Poker Finance: This management style in the design mode of communication of risk becomes very important, what kind of a way to communicate Founder property will be taken?
to Zhang Xuan: have multiple layers to communicate.
One is the concrete implementation level of business, such as for credit assessment, the business sector will put forward his counterparty credit assessment application, credit management team will be some assessment of the credit rating or credit report for this customer.
For the report, the credit management team will maintain close communication with the business team, to build consensus.
at the sectoral level, there will be regular inter-departmental communication will, such as the Risk Management Department with the business units have a mechanism for regular discussion of communication; with the legal department or financial department, financial department, etc., parallel functions
there are also mechanisms between risk communication.
In addition, at the corporate level is also a special communication mechanism, such as business management committee, risk management committee.
➤ Poker Finance: Founder property current risk management process: from risk management to risk discovery, which has to do the job?
to Zhang Xuan: major aspects of the process, we are in fact common, unless the current system is not yet perfect.
starting with the identification of risk, which is actually in advance on the work to be done.
Before any business project, we must advance those types of risks from various dimensions to my earlier mentioned, identified, refine it, and then the appropriate response to some of the persons responsible for the development, control measures, which is to identify risks.
Equivalent to the risk, so it was necessary to be aware of.
After identified in the course of business execution, but also has some monitoring and control measures.
If more specific to do what work, such as the business is to take stock.
Risk identification is the front-end work, there is no recognition of counterparty credit risk, the current party warehousing, storage of goods way there is no risk of the right to make the appropriate risk response plans, and then began
execution of business.
risk monitoring work in the course of business execution.
Gathering the appropriate data, to detect anomalies order some risk.
Once the risk does occur you need to deal with risks.
Measures need to deal with the early identification has already done, combined with the actual, final take appropriate measures to resolve or avoid, or eliminate, transfer, or otherwise, the risk resolved out.
The final summary is after the completion of operational work, in order to improve the existing system.
In fact, I think, any sense of control should be a closed-loop process, it is nothing more than the difference in every aspect, the degree of fineness different.
➤ Poker Finance: Will there be requirements for frequency of transactions?
to Zhang Xuan: and will not do too many demands.
We have always believed, risk control departments and business units not so-called checks and balances, the pros and cons of mutual relations, but relations of partners.
do not do this deal, there will be a first division professional judgment, job risk control department is to help the business sector, we will make this risk may exist in a single transaction identified in advance, communicate with them.
Even if the risk does exist, but the business sector and the appropriate means of response measures, we assess down and felt it could afford such a risk, then it will allow the business sector to do this single transaction.
restrict trading frequency or frequency, I think it makes no sense, is a very extensive management style.
More, or in front of me always stressed, should be to identify risk, management risk, prepared to deal with initiatives, once the risk, can make up for in other ways or circumvented.
➤ Poker Finance: This is one of the approval process like?
to Zhang Xuan: any of our business, want to do, we must first project, and this project is the big point to judge whether this business model
In other words, with the project to specify what type of business do, what not to do, but not specifically where single business.
is described by way of example.
For example a class of business to do business, to launch a business project application by the department after the launch, the first issued by the department responsible for approval of the views.
After approval by the departments, we need the relevant
assessments issued by the department.
As the financial sector to assess the risk of this project from a financial point of view; financial sector from financing, financing point to review our existing funds, it is able to match this type of conduct of business; legal department from the business itself is more
compliance, regulatory, or whether it will violate a number of risks and other legal aspects.
If this project which will involve the potential risk of customer credit issues, we will advance to the alternative provided by the customer to do the screening, analysis of whether to cooperate, if not, it will replace the advice given
Of course, if there related to the specific logistics aspects, it also needs to assess.
According to the rating business, you need different levels of leadership for approval.
In this process, according to actual needs, it may also convene a special review meeting, through meetings of the proposed points of disagreement for discussion of various functional departments, arrive at a final decision.
In this type of business project and allowed to do business in the future, this type of business will be able to obtain a qualification access, this type of business later, we will set the application process.
Of course, still relevant departments involved in the review, but more of figurative, more quickly.
After approval by, will enter the implementation phase of the contract, probably is one such process.
➤ Poker Finance: futures and spot business, will merge accounts?
to Zhang Xuan: For this, we have standards in the project.
For example, the current combination of business, that business profit and loss in the final assessment, the period will now combine the benefits of both into account.
For intertemporal business models, such as near and far month arbitrage, or external disk such cross-market arbitrage, such a situation does not relate to the spot, and that at the time of accounting, will only count in the futures this end.
For example, there are closed in spot trading, which is a relatively safe mode, it does not involve futures, then I will go alone accounting.
The evaluation of a trade team or a certain strategy when in the end it depends on a combination of cash or cash intertemporal or closed, or other more complex forms, have different accounting basis
But from the perspective of the overall company, the final evaluation of the benefits must be accounted for with two aspects.
➤ Poker Finance: risk management on the final outcome evaluation?
Zhang in Xuan: is basically the end of each year, on the entire company level, will carry out the following year of business, risk management and control in these areas do report concluded that this
It is also equivalent to a past and work.
When that happens, you need to make next year’s overall risk strategy, risk limits generally can afford, as well as some of the business license.
The basis for these decisions is made during the execution of the business year, the risk assessment done, the analysis results.
➤ Poker Finance: performance appraisal will do?
Zhang in Xuan: Yes, and we do relatively fine, will be specific to the business unit, job, has a set of evaluation system. Correspondingly, there are some indicators
➤ Poker Finance: What are the relevant indicators?
to Zhang Xuan: fact, this issue is the content of human resources, and I generally say something.
The main content should be divided into three categories, one is the business class, the class of financial indicators, such as indicators revenue, profit and cash flow aspects.
One is the key business indicators, that is, except for earnings this year, what priorities do instructions, including channel development, customer development, including business model innovation, and so on, to support future earnings,
Another type is the management class indicators, including risk control, team building, management of other platforms, files, so there will be security.
When interviews, Founder Products Group risk management, risk control system of the content, in Mr. Zhang Xuan indeed have lots of dry goods, refining their views, unconsciously has put together a 7,000-word
However, there is more content, small series have yet to sort out, such as risk management tools, access to information channels, hedging / arbitrage, basis trading, quantitative assessment, risk management culture and so on.
it is unable to control themselves dry to share with everyone learning together mood, so the first release on pieces of content, content will continue to share next to you tomorrow, so stay tuned!
If you are co-organized by our work together on this poker CME Chicago Business Finance “2017 Risk Management Forum Chinese enterprises’ interest, click on the text at the end,” read the original “, you can enroll
* meet the qualifications for free participants: from the central enterprises, state-owned enterprises, including mixed-ownership enterprises, large enterprise groups and business executives respective leaders, Chief Financial Officer, as well as audit supervisor
operational and risk management and other related departments.
Corporate management, risk management director and head of priority.
Organizers reserve the right to determine the final qualification for the participants.
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