During 2013, Neste Oil developed its Enterprise Risk Management (ERM) system by deepening the management of those business opportunities that were left outside the business plan. The value of the ERM process lies in enhancing opportunities and reducing threats, and thereby gaining competitive advantage.
In order to develop reputation risk management, Neste Oil developed a framework where risks are prevented with Company codes, risk-consciousness, risk assessments, crisis management, and by strengthening reputation capital.
The focus of Renewable Fuel business margin hedging was shifted from systematic hedging towards overall margin management.
The ICT systems related to derivatives management and invoicing were customized to enable the regulative (EMIR) reporting of derivatives into trade repositories, which will start in early 2014.
Hedging market risks
Uncertainties in the global economy were reflected in the oil, renewable fuel, and renewable feedstock markets, and this volatility is expected to continue. Global oil demand is generally forecasted to grow moderately, and new refining capacity is likely to put pressure on simple refineries.
In the Oil Products business, Neste Oil’s advanced, high-conversion conventional refineries provide a reasonable level of natural protection in a low-margin environment, and the normal refining margin hedging ratio used has been relatively low as a result.
In the Renewable Fuels business the good operational performance resulted higher sales volumes and lower unit production costs. In line with Neste Oil’s current price risk management strategy, the margin hedging ratio used for this business area has been relatively high. The focus of Renewable Fuel business margin hedging was shifted from systematic hedging towards entire margin management.
Neste Oil manages its market risk mainly through the use of commodity and foreign exchange rate derivatives.