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Annual volatility greater than 50% can occur in any given year, making cashflow management and business planning a constant battle.

Unpredictable Fluctuations
• The oil market operates in a global environment with many variables that determine its price.
• Anticipating these short- and long-term drivers is extremely challenging.

Cashflow Uncertainty
• Managing finances in a highly volatility environment leaves your business exposed.
• Cash flow predictability and annual budgeting will be inaccurate and ineffective.

Disruption to Long-Term Planning
• Building for future generations is difficult when year to year revenues are highly variable
• Businesses that do not mitigate these risks find themselves constantly adapting long term goals, often at a cost.

Complexity
• Business decisions become more complex the more variables there are to deal with
• Making the right decision in a constantly evolving landscape can lead to speculation.

Potential Loss
• Without effective risk management, a business cannot protect against the downside.
• Hedging should be viewed as insurance that protects a business rather than a barrier to higher revenues. The cost of a business failing is higher than a single year of good profit.

Unpredictable Double-Digit Oil Price Fluctuations Throughout the Year, Rendering Precise Cashflow and Business Planning a Constant Battle.
Landscape

Annual volatility greater than 50% can occur in any given year, making cashflow management and business planning a constant battle.

Unpredictable Fluctuations
• The oil market operates in a global environment with many variables that determine its price.
• Anticipating these short- and long-term drivers is extremely challenging.

Cashflow Uncertainty
• Managing finances in a highly volatility environment leaves your business exposed.
• Cash flow predictability and annual budgeting will be inaccurate and ineffective.

Disruption to Long-Term Planning
• Building for future generations is difficult when year to year revenues are highly variable
• Businesses that do not mitigate these risks find themselves constantly adapting long term goals, often at a cost.

Complexity
• Business decisions become more complex the more variables there are to deal with
• Making the right decision in a constantly evolving landscape can lead to speculation.

Potential Loss
• Without effective risk management, a business cannot protect against the downside.
• Hedging should be viewed as insurance that protects a business rather than a barrier to higher revenues. The cost of a business failing is higher than a single year of good profit.

Unpredictable Double-Digit Oil Price Fluctuations Throughout the Year, Rendering Precise Cashflow and Business Planning a Constant Battle.
Static Hedging

Why Static Hedging Doesn’t Work

Why Static Hedging Doesn’t Work

Snapshot-based Approach

  • When it comes to tackling market volatility, many existing solutions employ what we call a "snapshot-based" approach.
  • This approach fails to adapt to the dynamic nature of global markets, which are constantly influenced by macroeconomic data, geopolitics, and supply and demand shifts.
  • Static hedging, by design, only works effectively at the moment it is implemented, lacking the agility to respond to ongoing market changes.

Expensive Premiums

  • Conventional hedging solutions such as at the money Vanilla options are extremely costly with upwards of 20% premiums.
  • For companies who’s business is exposed to global markets, the potential financial burden can be substantial
  • Allocating a significant portion of resources to cover these premiums becomes unsustainable, posing a considerable challenge for companies seeking to manage their risks effectively.

No Protection for Unforeseen Market Movements

  • Sometimes static hedging structures can leave you exposed if they are not set up correctly. Say you are an exporter, and you buy a put option $20 below the current market price. This option might be cheaper, but you remain fully exposed to a $20 fall in market price.
  • Such a lack of protection for the initial price drop can be a major drawback in volatile markets.

Protection but No or Low Participation

  • Some financial institutions may structure hedges in a way that offers robust downside protection but sacrifices the client's ability to benefit from rising prices in the market.
  • That results in little or no participation in potential profit opportunities, which can be especially frustrating when prices rise and clients miss out on gains.
Unpredictable Double-Digit Oil Price Fluctuations Throughout the Year, Rendering Precise Cashflow and Business Planning a Constant Battle.
Dynamic Hedging:
Blended Approach

Our Dynamic Hedging programme is a blended approach that combines real time adjustments to maximise Protection and Participation, all while ensuring cost effectiveness.

Navigating The Storm With Our Dynamic Hedge Programme

Begin a transformative journey where adaptability, affordability, and shared
success shine brightly in Our Dynamic Hedge Programme.

Cashflow Management Uncertainty

  • With our team of expert risk managers, we craft
    dynamic hedge ratios and utilize a versatile
    range of instruments.
  • This precision-focused approach allows for
    tailored solutions that align perfectly with your
    unique needs and market conditions, ensuring
    you have the right tools.

Cashflow Management Uncertainty

  • With our team of expert risk managers, we craft dynamic hedge ratios and utilize a versatile range of instruments.
  • This precision-focused approach allows for tailored solutions that align perfectly with your unique needs and market conditions, ensuring you have the right tools.

Cost-Effective "Protection and
Participation”

  • Cost-effectiveness is at the heart of our solution.
    We strike the perfect balance between
    "Protection and Participation," offering robust
    safeguards without breaking the bank.
  • Say goodbye to excessive premiums and missed
    opportunities – our approach is designed to
    empower you without burdening your finances.

Cost-Effective "Protection and
Participation”

  • Cost-effectiveness is at the heart of our solution. We strike the perfect balance between "Protection and Participation," offering robust safeguards without breaking the bank.
  • Say goodbye to excessive premiums and missed opportunities – our approach is designed to empower you without burdening your finances.

Mutual Prosperity – The 70% Balance

  • Our ultimate goal is not just risk reduction but
    creating mutual prosperity.
  • We've crafted a model where you still benefit
    when the market exceeds expectations.
    It's about striking the perfect balance
    and ensuring the programme
    works in all market conditions.

Mutual Prosperity – The 70% Balance

  • Our ultimate goal is not just risk reduction but creating mutual prosperity.
  • We've crafted a model where you still benefit when the market exceeds expectations. It's about striking the perfect balance and ensuring the programme works in all market conditions.

Real-Time Market Vigilance

  • Our Dynamic Hedging Programme operates
    round-the-clock, providing continuous
    monitoring and real-time adjustments to
    navigate the ever-changing global markets.
  • While static approaches fall short in adapting
    to market dynamics, we remain vigilant,
    ensuring you're always one step ahead.

Real-Time Market Vigilance

  • Our Dynamic Hedging Programme operates round-the-clock, providing continuous monitoring and real-time adjustments to navigate the ever-changing global markets.
  • While static approaches fall short in adapting to market dynamics, we remain vigilant, ensuring you're always one step ahead.
DYNAMIC HEDGING PROGRAMME
Fundamentals of the Dynamic Hedging Programme

Oil Exporter Illustration – The Perfect Hedge Programme allows a high participation to rising oil price movements, while protecting the profitability & cashflows from declining oil price fluctuations

  • Our transparent process ensures that you're an integral part of every decision. Your business has total control over all processes and decisions.
  • With all transactions subject to real-time approval, you remain in the driver's seat with a hands-on approach.
Transparency and Control
  • Our Dynamic Hedge Programme comes equipped with safeguards that protect the integrity of your financial strategy.
Safeguards and Integrity
Empowering Your Future
  • In a world of uncertainty, our solution sets you up for success. It's not simply navigating
    volatility, is about long-term growth.
  • With Our Dynamic Hedging Programme, you're not merely a passive observer – you're an
    active participant in a financial future that's both secure and successful.
Tailored Approach: Achieving your goals
Cashflow Uncertainty
  • Central to our approach is daily analysis of fundamental drivers that influence your financial landscape. Each driver is tested against predefined parameters to assess changes and how these effect your programme.
  • Consider a scenario where the current oil price is $80. In the event the price of oil drops to $45. Our dynamic hedging strategy secures you an effective price of $70 (70% protection).
  • Or, consider a scenario where the current oil price is $80. But the price of oil rises to $115. Our dynamic hedging strategy secures you an effective price of $103 (70% participation).
Optimized Protection and Participation
  • Our dynamic strategy is not a static strategy.
  • Each programme will be structured upon the unique needs of each client, such as requiring a higher level of protection or participation. We will work with you to achieve your goals whilst following the base assumption of insuring against all market movements.
  • Our goal is to optimize your programme based on evolving market conditions.
Let us help you achieve your financial stability.
Building Value: Leveraging the markets to your advantage

Using the right combinations of different market instruments relevant to your specific needs, our Dynamic Hedging Programme leverages the innate fluctuations of the market to your advantage.

Confidence In Your Programme
Resilience and Strength
  • Once implemented, our Dynamic Hedge Programme will reduce annual oil volatility by up to 80%.
  • Unlike a static hedge programme the risk management team has the ability to adjust and fine tune hedge ratios, instrument blending, strike prices and make other active management decisions.
  • Our goal is to generate alpha within the strict parameters of your hedging mandate to outperform your minimum requirements.
  • This will secure your assets against potential losses and allow your business to save more money whilst looking forward.
Why Nippur AG
Tailor-Made Approach
In-Country Value Approach
Complete Independence
Communication & Training

Adaptable Strategies

Comprehension of Unique Needs

Risk Management Expertise & Experience

Extensive Set-up Phase

In-Country Approach

Training and Knowledge Transfer

Complete Independence

Impartial Remuneration

Best Execution

Empowerment of your Business