1st Floor, Purbros Building, Waterkloofrand Corporate Park, 358 Buffelsdrift Street, Erasmusrand, Pretoria +27 86 124 2643

Risk Management

Exchange Rate Risk 

  • Objective: To contain the impact of exchange rate movements within an acceptable risk profile.
  • The word ”contain” has been chosen to indicate a conservative approach to risk management. The word "minimise" has not been used for the specific reason that “minimise” requires making something as small as possible.  This can only be achieved with a full knowledge of what will happen in the financial markets in the future and will require taking large risk positions in an attempt to obtain the full impact of hoped-for favourable movements.
  • There are various financial instruments which can be used in stand-alone or structured manner to help in the management of exchange rate risk.

Interest Rate Risk

  • Objective: To contain the impact of interest rate movements within an acceptable risk profile.
  • Interest rate risk should be managed in terms of a long-term strategy taking into account corresponding liquidity risk (in respect of investments).  
  • Fixed and floating ratios should reflect the nature and term of the underlying assets.
  • There are various financial instruments which can be used in stand-alone or structured manner to help in the management of interest rate risk.

Commodity Price Risk

  • Objective: To contain the impact of market price movements in metals, agricultural and other commodities within an acceptable risk profile.
  • Commodity Risk is normally managed by making use of Financial Futures, which are contracts whereby a commodity’s price can be fixed on a non-delivery basis.

Investment Risk (Surplus Cash)

  • Objective: Management of this risk ensures the protection of amounts invested while retaining sufficient liquidity to meet financial obligations and generating an optimum return within an acceptable level of risk.
  • Investment activities arise mainly as a result of the overall funding requirements. 
  • Investments should not be managed independently from debt and, as far as possible, should not expose a business to interest rate risk. 
  • Funding activities are limited to the debt markets.  Therefore, investments should, wherever possible, be confined to these markets.
  • Investments should be made recognising risk in the following order of importance:
    • Credit
    • Liquidity 
    • Return