A study on the counterparties risk management in cocoa trading companies: How commodities trading firms deal with performance risk?

• Autor(a) principal: Auckenthaler, Marie
• Data de Publicação: 2019
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/18942
• topic: Cocoa trading; Counterparty risk; Developing countries; Risk management; Gestão estratégica; Empresa comercial; Cacau -- Cocoa; Risco financeiro; Gestão do risco; País em desenvolvimento

This dissertation is conducted to extend the research on the risk faced by the cocoa trading companies which are mostly dealing with African entities. It analyses the counterparties risks including customers and suppliers’ risks. A survey determining which kind of strategies are used by the cocoa trading companies allowed us to understand the way of thinking of these firms. Also, many information about how to deal with the counterparty risks have been gathered through interviews with professional from the cocoa industry. After the prefinancing and credit risk, the risks of default and reject are the most important. It is usually due to the price variation, impacted by the climate changes, the political environment, or the lack of skills and honesty. Diverse solutions can be used to fight against the risks: financial instruments are a good solution to prevent the risk, such as the Letter of Credit (LC), or the Cash Against Documents (CAD). Cocoa firms are also willing to use Incoterms, credit insurances and Know Your Customer (KYC). The market risk is very high in both counterparties. That is why having the possibility to directly sell and buy on the exchange is a big advantage of the cocoa market. However, even if many factors can be used to manage these risks, most of them cannot be covered and are subjected to pure confidence and trust. This dissertation highlights the principal ways to manage the counterparty risks in a cocoa trading company.