CPRISK - Counter-Party Risk
What is CPRISK
The Operating Company's definition of Risk is built from 2 sources, accounting unmatched and non-secured debit amounts and non-invoiced forward commitments that represent losses to a counter party. Each counter party (CLI) can have it's trading/payment limits maintained and reported in CPRISK for performance comparison. Counter parties can be grouped in families and the reporting allows consolidation by family, which introduces the effect of a subsidaries risk being included into the parent's analysis where the parent is resident in a low risk country and the subsidary resides in a high risk country. CPRISK has many sequencing and grouping features to provide analysis by Country, Counter-Party, Family, Classification code, Department, Account Manager and Commodity.
The Commodity risk analysis reports TRADE non-invoiced forward commitments AND only applies the first 2 parts of the Commodity code.
CLI accounts can be classed as House, Group, Associate, Trade House, Supplier etc. You will probably need to filter/exclude Group and Associate accounts from the reports.
Payment risk is defined as amounts due from third parties which are net of any confirmed letters of credit drawn on first class banks. Receivables and payable ledger balances with the same company should not be netted unless there is a legal right of set-off. ITAS provides the facilities (DOCENT and SRC) to mark individual debit amounts as being Secured-payment and are thereby excluded from payment risk. The important aspect to these statements is that any partial payments are handled correctly in order to reduce the gross receivable.
Pre-finance risk (reported separately) is the sum of the debit amounts that have a specific expense code (maintained in EXP/right-click). These items are normally subject to special pre-shipment arrangements/contracts.
Where an account is recognised as being in default and some recovery is expected, the expected recovery credits (PROVISIONS) will be shown in a separate report column, these transactions are located using a specific expense code as maintained in EXP/right-click.
Market risk is recognised as either Negative or Profitable/Performance. For the purpose of the Operating company's exposure the Performancce Risk is the important item, i.e. where the current market evaluation shows a loss to the counter-party and therefore a possible default situation.
The column of Negative risk is reported to provide a complete view of the positions.
TRADE records marked as invoiced or write-off or weight-loss are automatically excluded from processing. TRADE records that are quotes, brokerage, 3rd party or Internals are also excluded from processing. Sugar Polarisation is included for both Adjusted and Market values.
How to Use
There are 2 styles of report (see help? on their grids for fuller explanation of content). You can select to exclude the TRADE evaluation. You can select different report sequences. You select the cutoff date and which exchange rates to use. You can filter to restrict the report content. You select the output media…
If you select output media = screen, you then have the feature to reorganise the report content by using mouse right-click. The 'insert columns' allows you add extra columns from the list to the report style and by use of mouse left-click on any column heading you can move that column around the report or drop/remove it by moving the cursor to the far left. You will asked, on Close, if you want to keep this report style as your standard.
If subsequently you wish to revert to 'factory settings', use mouse right-click and ‘restore columns' feature. Note that Head Of family is very useful to view on family reports and less important when not family style reporting. It is an element of the ‘factory settings’.
The Report Content Columns are:
a) Pre-finance amount. Some counter-parties have arrangements with the operating company to receive advance monies in lieu of future purchase invoices. Any unmatched debit amounts with a recognised expense code (specified in EXP, mouse right-click) e.g. 'PRE-FIN' will be included in this column.
Also outstanding Pre Payment ex purchase TRADEs (phys18) will be included in this column. The Pre-payment will be included IF it is marked as Paid and has not been Applied to an Invoice.
b) The account's pre-finance limit, CLI limits page
b) The account's pre-finance limit, CLI limits page
c) Interest owed from pre-finance arrangements. The standard would be to charge the account on a regular basis for interest which would be posted to the account using an 'IJ' document type. All unmatched IJs will be shown in this column
d) Non-secured debit amounts.
e) Unmatched debit amounts that are not 'IJ' document types and do not have an expense code ='PRE-FIN' and have NOT been marked as SECURE payment will be shown in this column
f) Secured debit amounts. Unmatched debit amounts that are not 'IJ' document types and do not have an expense code ='PRE-FIN' and have been marked as SECURE payment will be shown in this column. Secure payment marking is normally associated with payment terms such a Letter of Credit or a bank guarantee
g) Unmatched Credit amounts. In order to reflect the full state of an account it is necessary to show any offset credits that are NOT marked as provisions (see below)
h) The payment limit is maintained in CLI limits page and indicates the credit control amount for the account
j) Forward Priced uninvoiced sales tonnage. The MT equivalent of all SALE contracts that are either fully priced or part price/fixed
k) Forward Priced uninvoiced purchases tonnage. The MT equivalent of all PURCHASE contracts that are either fully priced or part price/fixed
l) Forward Unpriced uninvoiced sale and purchase tonnage. The MT equivalent of all contracts that are either NOT priced or part price/fixed. The total is a gross number i.e. not offsetting buys + sales
m) Total uninvoiced MT, i.e. sum of 3 previous columns
n) Negative Risk, from the Operating Company viewpoint. Sum of the contracts that are theoretically profitable for the counter party, e.g. a sale at $1000 PMT with a market price of $ 900 PMT
p) Performance/Profitable Risk, from the Operating Company viewpoint. Sum of the contracts that are theoretically loss-making to the counter party e.g. a Purchase from counter party at $ 1000 and the market price is $ 1200
q) Commitment Limit. The limit from CLI limits page
r) Total risk, sum of pre-finance, interest, Non-secured debits and performance risk columns less the negative risk
s) Total limit. Sum of the 3 limits shown in previous columns
t) *** Not functional *** Workable LC amount. Sum of the Letter of credits (incoming only) that have been marked as workable and have not been fully utilised and have not expired. This is a memorandum value to be used in evaluation of total risk that may include some forward exposure that is in fact covered by open LCs
w) Account Provisions. It is possible that some of the non-recovered debits may be partly covered by a provision amount posted and recognised as an unmatched CREDIT with a specific expense code e.g. 'PROVIS' (this is maintained in EXP with mouse right click nomination)
When family reporting is requested, the limits can be selected as either the sum of all the individual CLI accounts that comprise a family OR use the Family limits that are maintained separately on the CLI Head-Of-Family account (CLI/View/Family Limits).
Part of Finance and Banking module