Risk Management in Oil Trading Navigating Volatility

00:07

Hassan Al Alawi Ladies and gentlemen, good day to all of you from wherever you join us and this interesting oil trading as part of Energy Trading Week. I am Hassan Al Alawi. I will moderate today's panel. I have over 28 years experience in project management, project finance, capital market, merger and acquisition, risk and business continuity management that came from various positions.

The panel addressing risk management in oil trading, navigating volatility. We aim to understand how to manage oil trading risk in the context of high price volatility, explore strategies that have been put in place to manage such volatility, how to optimize margin management and what tools are available that use for better cash management. It's a 45-minute discussion that we hope will be interactive and beneficial to all participants. We encourage the audience to ask questions, and I will cover some of the questions during the panel where possible. Otherwise, at the end of the panel.

We have with us three experienced speakers here Pierre Lebon, Sameer Soleja, Muneeb Ahmed:. In a few minutes, I currently request each panelist to give a short introduction to themselves and their interest in the topic, starting with Pierre, Sameer, and then Muneeb. The floor is yours, Pierre.

02:00

Pierre Lebon Thank you very much, everyone. So, I'm Pierre Lebon. I'm the Director of Analysis at cQuant.io. I have 16 years of experience in the valuation and risk management industry in the commodities area. And, cQuant is a SaaS analytics platform for energy portfolios. And, we serve a team of quants. We service highly demanding clients in the area of energy and commodity management.

02:34

Hassan Al Alawi Thank you Sameer.

02:36

Sameer Soleja Yes. Hi, I'm Sameer Soleja. I'm the Founder of Molecule. We are a cloud ETRM/CTRM company. I've been in the industry for about 22 years at various other ETRM companies before starting Molecule. And, you know, I'm glad to be here today.

Volatility is something that all of our customers are trying to manage with our software. And, it's something that we stare at every day.

03:09

Hassan Al Alawi Great. Muneeb.

03:11

Muneeb Ahmed Hi, everyone. My name is Muneeb Ahmed:. I am the Director of Trading and Logistics at Avfuel Corporation. Avfuel Corporation is a global aviation fuels and services company. We have over 5,000 fueling locations around the world and, you know, managing risk and volatility is what I handle here. And, it's been a very interesting year. And, we're looking forward to sharing some of that in the next 40 minutes.

03:44

Hassan Al Alawi Great. Yeah.

Thank you all. Now, let's kick off the panel.

Now, as I mentioned earlier, we aim to learn how to manage our trading risk and the context of high price volatility. Nonetheless, with the recent geopolitical conflict, someone may find it so difficult to stand in front of such an unprecedented price volatility.

So, the question for our esteemed panelists soliciting new reviews in a couple of minutes, please. To what extent have the current ongoing geopolitical – between the brackets or Korean Russia conflict, mainly – uncertainty impacted oil trading and business?

Yeah, we can start with you, Pierre.

04:41

Pierre Lebon Yeah. So, effectively, all commodities – energy commodities – have been impacted. What's interesting is we have seen that oil prices are now sort of stabilizing around $90, $95 a barrel. And, these price level have been seen in the past. They are not from a pure, you know, price level perspective and scene. Volatility, as well, has been sort of, you know, experienced to these levels.

What’s very new is the relationship and the dependencies or all the other commodities. like gas and electricity, to the old prices. So, approaching this from a modeling perspective, we can still rely on, you know, legacy I guess, models and statistical models to distribute the prices along the, you know, the forward curve.

And, the challenge that people are facing these days is, you know, what types of scenario should we, you know, shoot for when we want to do proper risk management, right? Good risk management practice would involve defining several scenarios along which you distribute the prices so that you can have a distribution of possible prices. And, these are the current challenges because no one knows if tomorrow's oil is going to be, you know, flowing as it should or if there's going to be shortages in the markets. That's the uncertainty, and it is embedded mainly in the future of the prices.

06:24

Hassan Al Alawi Great. What do you think, Sameer?

06:28

Sameer Soleja Yeah, I mean, I think to what Pierre said, we are seeing real questions about, you know, real risk management metrics that have been sort of ignored for a while. You know, how do you do your VaR? Oh, well, what if I would like to twist the value of risk computation this way? Obviously, KYC is starting to become important, even on our part. You know, is there a question of which companies we can do business with and which ones we can't, and that's a real one for us. And, obviously, for our customers, as well. Lots of new fuels companies coming online that we see. And, so they need things as they need systems as they start to try to navigate volatility. They need to consolidate data as well.

And then lastly, new valuation models. This is a little older, but you know, I remember when the price of oil went negative for a couple of days. And well, let's just say Black-76 doesn't support that. So, there were people scrambling, including us, to try to help our customers with the modeling that they needed to do.

07:41

Hassan Al Alawi Yeah, right. Muneeb.

07:44

Muneeb Ahmed Yeah. You know, I'll highlight a little bit of… give a little bit of context or maybe might help our viewers to understand pre-invasion and post-invasion, right. What has really changed?

I mean, if you look at, you know, oil fundamentals. The West was importing 5 million barrels a day pre-invasion, pre- Russian invasion. And now, that is down to three and a half million barrels per day, right. In that one and a half million barrels a day, not all of that was lost. Right? But, certainly some of it was lost because of efficiencies that had to be rerouted. So, that's huge, right for global oil supply and demand.

And so, it totally threw the oil markets out of balance in a way that we haven't seen before. And then, maybe the only other time that we can, you know, sort of make an analogy that, you know, something similar happened from a supply standpoint. Or, you know, the opposite that happened in 2014 when a lot of supply. And so, you know, now we're looking we have, you know, not so the summer everything has been super volatile. Because, now it's all very policy and geopolitical driven.

We don't know when, you know, how the Russian embargo… if that goes through, that puts the rest of that three and a half million barrels per day at risk, right? And so, that could be another game changer. And that could be huge on oil, you know. That could be extremely bullish on oil prices. But then, you know, there's a bearish argument to all of this, too. Because, as prices go up, people kill their demand.

Europe is actually self, you know… it is going to be it's already starting to kill demand artificially, right? Whether it is taking away the heat from saunas around the public pools, closing down factories because electricity prices are too high. So, the market is adjusting to all of this and so that makes for some bearish scenario. As to… until this volatility is extreme, and we've seen this and options prices. We could see this across the curve, right? And so, when we think about, you know, risk management and volatility management, right? I mean, there's a time to think about, you know.

What, from an organization standpoint, leveraging softwares to make sure our positions are correct. And then, making sure that – and not just that – making sure the risk modeling is actually way better. Where, you know, we're not relying on the standard bottom models, and really stress testing the books to see. Because I, you know… these days, margin calls could actually, you know, kill companies. And, that's one of the biggest challenges for companies around the world.

10:54

Hassan Al Alawi Okay, great. Thank you. And, I know that talking about the impact is, you know… probably will be endless. Because obviously, it's high, if not extreme. As you know, it can be lived and experience on daily basis. So, thank you.

Moving back to the agenda. And, starting with Pierre, again. What strategies have been put in place in face of price situation? What we need to understand is, how is the coordination between front-office, treasury, and back-office done?

11:32

Pierre Lebon Yeah. So, I think, generally speaking from a risk management software perspective, these spots – I guess a middle-office – has been seen as the day to day routine of, “Okay, I have my model. I run my report. And, on a daily basis, I see that prices move, and they stay within comfortable price bends. And yes, sometimes they're higher, sometimes they lower.”

I think, nowadays, the challenge is going to source tools that can… that are, first of all, technologically very competent and new to adapt to. You know, software-as-a-service. You know, on demand analytics. Really ways to procure results very efficiently and quickly, and then disseminate that through the front-office, middle-office, and then all the way to back-office.

So, that's the challenge that needs to be addressed. And, the strategies to do this, you know, again, from a qualitative perspective down to the reporting side of things, is to try and see what we can salvage from the old times of, you know, the pre-invasion statistics that we observed and the prices. And overlay that, on top of, you know, some fundamental analysis going forward. So, having model well enough to marry together the future price curve that would come from financial analysis, and then marry that with the volatility, calibration correlations, which could still be pertinent and useful today. So, these are the challenges to be addressed, especially on the software side of things.

13:26

Hassan Al Alawi Okay. And, Sameer, what are your tips and that?

13:31

Sameer Soleja Yeah, I mean, I think where in years past, mid-office was looked at as, “Hey, they're the group that allows permissioning of new instruments to be traded. There's a process.” Opportunities are happening really fast. And I think right now, mid-office is probably more reacting to the opportunities and trying to just keep the data and keep the position straight.

You know, this idea of six weeks to support a new market is just not fast enough. We had a customer call us yesterday letting us know they were turning on a new market this morning, and we had better be ready.

So, that is really the more normal state of affairs here because these opportunities are happening fast and all over the world. And so, I think that's really interesting. And then, also trying to keep a single version of the truth between front, mid, and back-office is sort of table stakes, but it is still very hard.

You know, we had a customer recently who was struggling to figure out the impact of interest rates on option valuation models between front, mid, and back-office systems. And like, that's just a thing nobody's paid attention for 10 years. And now, it's really becoming a thing.

15:03

Pierre Lebon Yeah, and I think the… to that extent, anything that is oil index nowadays, you know, needs to be taken care of even more carefully than before, right? So, inclusion of interest rates. But also, you know, if you've got any deals which are indexed to some average use of gas and a mix of energy commodities, I mean, you really… the need to identify the primary drivers of the portfolio risk if it's embedded in these types of contracts is quite paramount to managing the portfolio as a whole.

15:42

Sameer Soleja Which – just to add to that, Pierre – is really a function of understanding the native position of the organization, right> I mean, it's not necessarily just trade anymore. It's, what do we do? What do we care about? Sorry, Muneeb. I think I stepped on something you were gonna say.

15:58

Muneeb Ahmed No worries. No worries.

I was actually just going to highlight, I think, what you said about… what Sameer said about single version of the truth. I've seen this in many organizations, and it is especially… I mean, when the accounting system is not aligned with the trading large market, that's when there's the biggest discrepancy.

Of course, if, you know, if the whole company follows market-to-market, even then there's discrepancies. And, not just that, as Pierre and Sameer highlighted, I mean, more and more, right, as, there's real impact, real noticeable impact on cash flow from margin calls and the like, this is starting to come way more to effect.

16:51

Hassan Al Alawi Okay. And there's one question that I guess it fall within – you know, the points that, Muneeb, you might take that – it says static, dead inventory. Valuations impact the box and the current environment.

Is it advisable to hedge these valuation? Or, live with it as it doesn't impact the cash flows, and valuation of products is aligned with the crude pricing on macro-basis? 17:26

Muneeb Ahmed Yeah. And, you know, the answer to that is very complicated. And also, it depends. You know, it depends on your company. Cash flow might be super important to you one day, and net worth might be a lot more important to you the next day, right? So, really hedging... it's hedging your net worth, right?

The value of that – of your inventories, for example, if you have a bunch of inventories. But, when prices go up, right, it has an impact on your cash flows. No matter what. I mean, because you've… prices go up, and it's offset by the hedge. But then, you sell the barrels. But then, you have to replace those barrels with expensive barrels, as well. So, it's on the way up. It's a huge cash flow, you know, cash out, play.

And so, you know, I think, again, it depends on a company's risk strategy. It depends on what is important to them at that point in time. And, you know, and I think for anyone who is looking to sort of go right in the middle somewhere, I would advise to look into options, right? If let's say you have a bunch of inventories and you and you short, you know, you play… your general default is to short futures against it. You know, I would say buy call options out of the money, right, so that you at least have this limited, limited downside, to your cash flow. So, you know, whether it's 20 million you can live with, that's where every corporation to understand besides themselves.

19:04

Hassan Al Alawi Okay. Thank you, Muneeb.

There's another question before moving to the next item of the agenda. And, probably, Sameer, back to you. What are the biggest demands of risk technology these days?

19:19

Sameer Soleja Yeah, I mean, I think the thing that is the most common that we hear all the time is “everything in one place.” You know, whether it is a refinery that needs its feedstock forecasts in the same place as its mark-to-market valuations, or whether it's, you know, somebody trading some other commodity who needs to understand their inputs and outputs, as well, alongside their actual trading activity.

You know, as we talk to more and more folks in the industry, I think it's been sort of standard to model each of those things as a trade. And, in some cases, that doesn't really fit. Because those aren't trades. They are positions that people have. And, so this need to see everything in one place. A lot of people accomplish this with a data lake or some other ELT stack. It seems to be a growing need. Okay.

20:27

Hassan Al Alawi Pierre, do you want to add anything on this question?

20:30

Pierre Lebon Yeah, I fully agree with Sameer.

You can't necessarily have a one size fits all system because, you know, different systems could be good for different types of commodity. And, the means emerging from the customers from the markets definitely centralized around being able to manage the phone's data flows and having the newest technologies around that. You know, having APIs to manage the data and not having to go through very painful and less integration processes to achieve that. So that, you know, you can then end up with the centralized reporting place for your management.

21:21

Hassan Al Alawi Okay, great. Thank you.

Now, moving to the next item in our agenda. Now, starting with Sameer. How do you optimize margin management, in general, as I will move later on to tools in the next item?

21:38

Sameer Soleja Yeah, I mean, this is something that we've been looking at hard and is a struggle. Partly because there's so many different margin models in use, you know. Heaven help you if you want to implement a span margin calculation. But, a lot of people use that for their trading.

But now, we're also seeing that certain exchanges are moving away from span, as well, which means you need that model running. And then, when it comes to bilateral margining, I mean, again, these are all bespoke proprietary models that people are running and optimizing them.

Well, I think that's probably an answer for cQuant and Pierre’s firm. We simply record and and take the output of the fixed calculation.

22:32

Pierre Lebon Yeah. And sometimes, even the exchange have difficulties coping with the so rapid movements around the prices. And, they have troubles just reporting to, you know, the people trading on the platform about the margins. And, the people turn around to companies like, you know, an analytics platform like ours and say, “Look, I need to be able to report intraday for my margin calls because I don't get any information before, you know, few hours or several hours after the close of trading.” And then, we need to provide that to the client and develop tools to help them… being able to, you know, have not just the end of day margin call because it can be so huge that it's almost too late to do something about it. But also, having the ability to have an idea about intraday, how this margin call is going to look like at the end of the day.

23:33

Hassan Al Alawi Yeah. Okay. And, Muneeb, what do you think?

23:36

Muneeb Ahmed Yeah, I mean… it's again, I think, Sameer and Pierre touched on it. It's a very tough environment. Right? Managing. I mean, margin. And, I think we're talking about sort of, maybe margin call here, but also, you know, that which then feeds into company margins. But, I think managing that as a buyer, largest thing on the same page with treasury, right?

Think on the same page with your back-office and the middle-office. And, I think having a way to you… communication I've seen is actually probably the biggest challenge and the biggest advantage in situations like this. Where, when everyone in the corporation is aware of things, you know, surprise margin calls coming up if, as it turns to not be a surprise. It just helps things to go much more smoothly.

24:38

Hassan Al Alawi Yeah, okay. There's... actually, I got a question from one of the audience. How do you move from reactive to proactive approach for handling a new line of business?

Who would like to take that first? 25:03

Sameer Soleja I can start. Just building on what Muneeb just mentioned, communication. Right? You know, I mentioned we got a call from somebody saying, “Hey, we're starting in a new market tomorrow, FYI.” That's fine. We were ready to support them.

But, the truth is that, you know, mid-office, back-office, front-office, treasury – everybody needs to be communicating about new lines of business because, you know, in an era of high volatility that could be a company bet as opposed to a small bet.

25:43

Hassan Al Alawi Yeah. So, the tip is communication from your side?

25:46

Sameer Soleja Absolutely. Yeah.

Pierre?

25:49

Pierre Lebon Yeah. Well, I come from a quantitative background. So, I tend to think of these problems as a quantitative analysis problem. And, I think new lines of business may need, you know, new valuation tools and methodologies. And, you know, this is probably the types of things that needs to be anticipated when opening these new lines of business.

You don't want to have to wait for your middle-office to have the proper tools to be able to risk manage. Because I mean, the worst nightmares of the front-office traders is, you know, that they can't start these new line of business because they are told, “Oh, you need to wait for the middle-office to have something to risk manage the portfolio.”

So, anticipating the needs, you know, of the specifics of the new lines of business that you're entering into is probably key.

26:46

Hassan Al Alawi Yeah, anything to add, Muneeb, on this point?

26:49

Muneeb Ahmed Yeah, we'll just start very quickly. I think, you know… again, it's sort of being proactive. In this, I think it's kind of a question. It's really, when you're even setting up something new or even just starting something new. I think having a roadmap of, you know, what other possible lines of businesses you may or may not enter into. Just thinking about that and highlighting what those exposures are would allow you to set up those instruments at the outset, which is way easier than later on, right?

Once you have a system in place – whether it's an Excel file or a sophisticated software, right – everyone is used to that system of recording. And then, when you introduce a completely new instrument, which has to be inputted manually – or whatever the case is, right – throws off the entire system. But, I think, yeah, I would just recommend, I mean, you know, in any business, think about what the potential exposures might be.

What potential exposures you might want to offset? Or, in any case, right, it's not just financial instruments, but for anything in particular, you know. Organization at the outset is definitely be messing up a system when it's fully in place.

28:19

Pierre Lebon Yeah, we need that. And, a good example of that is the renewable energy space, where there's a huge amount of new entrants going and tackling this new line of business without the tools. And, I think what is key? And, what I'm hearing from the market is these people really want fast to implement tactical tools to get the new line of business going.

28:45

Hassan Al Alawi Yeah, okay. So, I can basically summarize those points into moving from reactive to proactive communication. Proving tools, methodology, a roadmap to list all the challenges. Probably, those are the main things.

Okay, now let's move to the next item. We have couple of questions. I'll come later to those. The next item of the agenda is… okay, it's centered around basically the available tools that to deal with such situation. What tools are available for a more accurate real-time evaluation of exposures, allowing for better cash management?

So, we can start with Muneeb this time.

29:43

Muneeb Ahmed Yeah, I would say, you know, it's tough to say, sort of, one tool, right. Again, whether you're trading or hedging, managing risk. Again, I've been in some groups that have done all of this on Excel sheets, right? And, I've been in other groups that have done this using sophisticated software, right? No doubt, sophisticated softwares are the best. Because you just have… you don't have to spend 10% of your day in managing – or not just managing the position and entering the position, marking the position, and then reporting the position. Right?

Because usually – you know, I'm sure, softwares like Molecule and cQuant – they, you know, integrate again the front-office, mid-office and the back-office. Whereas before, you know, if you're doing all this in Excel, requires a lot more communication. A lot more, you know, just… it's a little less efficient. So, if I say, you know, what are the tools that are required? One is, you know, even not looking at the tools, it's a good process that is required, right? Good process for having, you know… I saw a question – someone's asking about FCM.

Whatever the case is – having a good process for executing positions for centralization of positions. Because, you know, again, there's a thousand and one ways you can trade on CME. You can trade on if you betrayed on, you know, over-the-counter, and, and all of a sudden positions get all over the place, right, having maybe one central FCM or clearing house to center all your positions is one idea, right? And then again, from that, integrating it with some sort of tool would definitely help. So, that would be my take.

31:36

Hassan Al Alawi Yeah, great.

Sameer.

31:40

Sameer Soleja Yeah, you know, just sort of building on that. There are modern and less modern versions of each of those. Everything from an FCM to an exchange, etc. And, finding ones that work together can be really helpful because for those, it could be just the flip of a switch. And, “Oh, okay, that's integrated. That's one less step I have to worry about.”

And then, what we've seen downstream is, as people are starting to put together, well, data lakes essentially, just areas where there's lots of pre-transformed data from forecasting to position management even to financials. There is tons of great tech that's come out of Silicon Valley that can help with that. You know, on the data storage side, everything from Snowflake to PostgreSQL. I know people are very excited about Snowflake these days. Internally, we use PostgreSQL. It's just simpler.

And then, there's some great loading tools like Fivetran and Airbyte, which will just, you know, pump data from one system to another without you having to worry about it. And then, from transformation. Transformation in 2022 is totally different than it was 10 or 15 years ago. There's starting to become a standard set of open source-ish tooling called DBT that is amazing for data transformation. And then, there's all sorts of BI. Any BI that you can think of. Everything from, from Power BI on the Microsoft side to Mode Analytics and MetaBase, which is what we use at Molecule.

So, I guess all that to say, there's great tooling that's come out of Silicon Valley for the purposes of mining and consolidating data from all these hopefully pre-integrated systems.

33:32

Pierre Lebon Yeah, I agree on that. And, I definitely observed a lot of, you know, the market expectation nowadays is, you know, not to have very complex tools to use. But, everyone wants to get to, you know… ways to analyze data in very intuitive ways. These tools, which are, you know, a lot more intuitive than, you know, they were 10, 15 years ago.

34:00

Hassan Al Alawi Yeah. Okay. Great.

Yeah, there is a question that we can take in here. It says with increased volume, increasing capital requirements, and interest rates increasing, is there a move to FCMs? Away from sleeving?

34:25

Sameer Soleja Sleeving as in bilateral credit, perhaps?

34:28

Hassan Al Alawi I guess. Yeah. I guess that's what's meant.

34:36

Muneeb Ahmed Yeah, I'm a little confused on that question, as well.

Whether, bilateral?

34:45

Hassan Al Alawi Yeah. Bilateral credit. Yeah.

34:47

Sameer Soleja I mean, just from our perspective, when we see somebody trading an instrument, like… it seems like folks will prefer exchange trade. Big. So, that would be cleared through an FCM wherever possible if there's liquidity, if there's volume. Just because it is so much easier. But, a counter to the move to FCM. And, I think something Muneeb mentioned a second ago – having everything at one FCM.

We actually see an increased movement towards people having multiple FCMs. Because, it's another sort of risk vector where, you know, maybe one could lock your account while you're trying to unload or capitalize on a position. So, I don't know, Maybe multiple FCMs is the new bilateral credit.

35:36

Muneeb Ahmed No, I, you know, I can maybe add something quickly.

I think Sameer is exactly right. I mean, having one FCM – there is a problem, right? All of a sudden, you're… you hit your limits on that FCM, and you get locked out. And, you can't put in any more trades for maybe 15, 20, 30, 1 hour, you know. It doesn't… whenever you get a hold of them and whenever they're able to enable or, you know, take the restriction off. So, definitely, I think, summaries, right? Having multiple FCMs takes that risk away.

But then, there's an argument to be made for bilateral, as well. Right? Bilateral credit. Because liquidity is low in them in the market, especially the more specialized you get on the products, right? The less liquidity you might find if you are in the market for options. I mean, the bid ask is extremely wide. You know, so it depends on your strategy.

If there's a lot of… there's something very illiquid, it often helps to have that relationship. Some bilateral relationship with a corporation that's just always willing to step in, and then take the other side.

36:52

Hassan Al Alawi Yeah, yeah. I guess that addresses the question of falling by Solomon Shields, yeah.

Okay. Now, we actually covered the items within the agenda. And before, you know, closing, what I would like to ask each panelist for a final word in like one to two minutes. Pierre, what's your key takeaway?

37:24

Pierre Lebon Well, I think it's important to secure the modeling framework from both a qualitative analysis perspective, right? So, which quantitative models which tools to use and from a technical standpoint, as Sameer and Muneeb have said earlier, as well.

You know, having a centralized place takes, you know, different technologies specifically to come together. Securing both the modeling aspects and the technical aspects is a key thing. And, finding the proper tactical tools to react to the, you know, turmoil right now, is probably quite important, as well. Rather than trying to, you know, focus some attention and trying to build that internally.

Because, in these times of high risk, it's probably better to refocus the company needs on its core business and seek the help of some experts that can provide fast and tactical tools to help going through the turmoil period until the market stabilizes back.

38:42

Hassan Al Alawi Yeah, thank you, Sameer.

38:48

Sameer Soleja Yeah, just to, sort of, build on that.

You know, one of the things that we at Molecule really have fun with is seeing new things about markets. Permutations we never even contemplated. And, seeing what interesting things people are doing.

And so, today's environment is so much more interesting than it was, say 10 years ago. And, you know, communication is obviously very important, whether it's person-to-person communication or system-to-system communication. And, we can't take system-to-system communication for granted because that's not how systems have always been built in our industry. You know, what we see is that the technology needs to react quickly to changes in your business, sometimes even within a day.

So, you know, maybe this is self serving, but it's always helpful to choose modern tech.

39:45

Hassan Al Alawi Great and Muneeb.

39:49

Muneeb Ahmed Yeah, it's been a very interesting year, right? I mean, then multiple cycles in one year is… it's been a completely wild lifetime of learning in one year. And so, there's a lot of takeaways, but I think the main takeaway would be to really just keep stress testing your books. Continue to improve risk modeling, right? And then, continue to communicate between the front-office, that middle-office, and the back-office of a treasury.

And, you know, margin calls had never been in focus before. And, just most companies had the amount of credit and all that, right? Interest rates were low. Everything was fine. Now, we have a high interest rate environment. We have, you know, credit drying up. Everybody needs credit because everybody's inventory and, you know, cost of doing business has gone up.

So, it's much more complicated. It, you know, it's become a much more complicated arena, which now requires way more integration between the front-office, and especially treasury. And, position management. And, you know, now banks want to know, you know, “What are your positions? What are your future positions? And, how… what can we expect? Are you going to come and ask for a credit line increase?” Right?

And so, that's when actually, I'm seeing traders are actually getting involved in those because they sometimes the couple of, you know… that's the part of the organization that can answer some of those questions. So yeah, it's become complicated.

So, I would emphasize stress testing and communication.

41:35

Hassan Al Alawi Yeah, great, great.

Those are quite interesting, actually, takeaways. Secure modeling framework; find the right tool to address the challenges; select expert help, and, of course, continue improving.

Basically, you will risk modeling and the most important is: communicate, communicate, and communicate between different offices.

Great. Thank you all. With this, we conclude the discussion. I hope everyone found it fruitful and beneficial by addressing its key points and covering the agenda items. Thank you all. And, special thanks to the organizers and the sponsors and to our esteemed panelists.

42:29

Panelists Thank you.