In transport and dredging the costs of the fuel component is significant. By adding fuel price adjustment clauses in contracts, the commodity price risk is passed on to the contractors. Fuel risk management is often taken care by treasury departments.
Transport companies cannot always pass on the effect of rising fuel prices. Companies have to accept partial floating price risks. These companies need to determine an acceptable risk and hedge the remaining exposure. Calculating and managing these risks and exposures are often performed in Excel. Airlines, shipping companies and large transporters can use KYOS portfolio & risk management system to calculate the cashflow-at-risk before entering into financial hedges with banks.
Cost savings – KYOS portfolio & risk management system
In the KYOS portfolio & risk management system users are able to store globally sourced fuel contracts. Cashflow forecasting becomes an automated proces as multiple fuel indexes can be linked to multiple price sources. Cashflow forceasting becomes an automed process consuming considerable less time then Excel based analysis. Resulting in significant lower costs with less time and less resources spend.
Excel has proven to be a pitfall for many companies in terms of costs, mistakes, hidden risks and potential fraud. ERP systems like SAP look backwards in stead off to the future and cannot perform the required risk management calculations. The KYOS portfolio & risk management system captures years of experience in managing risks of fuel contracts and market price volatility, leading to effective hedging strategies.
Managing cashflow variance – KYOS portfolio & risk management system
The higher and more frequent market prices move up or down the higher its volatility. Volatility is often expressed in a percentage and can be calculated for e.g. interest rates, currencies (FX) and commodities. A highly volatile market price is not per definition a bad situation but you probably feel more comfortable with less volatile costs. GasOil has shown an average volatility above 20% in recent 5 years. This is more than double the volatility of EURUSD in the same period. Calculating the volatility should be an integrated part of your fuel risk management strategy.
Automated market price analytics are combined with your projected positions. It will provide you with clear insight in the current cashflow and potential cashflow variance versus management expectations. You will have a better insight in project cashflows and the associated risks. Avoidance of unexpected cashflow movements will add value to your organisation.
Fixed or floating prices – Fuel risk management
Procurement needs to find a balance between fixed and floating prices. The KYOS portfolio & risk management system will help you to find your “risk and reward” optimum by simulating multiple cashflow variances. It will provide you with clear insight in the potential project cashflows given any variance between fixed and floating prices. Your fuel risk management policy will be built on sophisticated calculations combined with your market experience.
Improved fuel risk management by managing your cashflow variances will lower your required working capital.
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