Credit Risk Management

Energy market participant are facing the evolving credit risk environment. With increasing migration of trades to centralized trading and clearing platforms, coupled with decreasing emphasis on credit rating agencies, the need for a robust credit risk management cannot be overstated. Credit risk is a critical function for any market participant engaged in commodities or derivatives transactions. A strong credit risk group ensures the ongoing monitoring of the counterparties’ ability to perform the underlying physical or financial transactions. With continuous monitoring, a credit risk group serves as the last line of defense for protecting its company’s cash flow and sound financial management.

Kolobara Law Firm works very closely with our clients’ credit risk groups. We help them identify, quantify, and manage their credit risks consistent with their overall corporate appetite for risk and the underlying trading or hedging strategy.

Kolobara Law Firm utilizes our extensive in-house experience to assist our clients with drafting and implementing credit risk management policies and procedures. We offer a helping hand to create a credit scoring methodology consistent with our clients’ trading portfolio and geographic exposure. Also, we can assist with matters related to establishing and administering credit limits, acceptable collateral, sequence of events for margin calls and maintenance.

Kolobara Law Firm works closely with credit risk groups to ensure that the underlying trading documentation is properly cross-referenced in order to ensure that the credit support documents do not adversely affect the underlying trading agreements. Unlike many other provisions in trading agreements, the credit terms and conditions cannot be standardized because they are unique to each counterparty’s creditworthiness. For this reason, we draft standard credit support documentation to allow our clients the flexibility of continuously adjusting the credit support documentation to optimize the credit risk protections.

Kolobara Law Firms drafts and negotiates a variety of credit support documentation for our clients including, without limitation, corporate guarantees, master netting agreements, collateral and margin agreements, credit support annexes, and lockbox agreements.