Risk Is An Asset: Turning Commodity Price Uncertainty Into A Strategic Advantage

by Wayne Penello, Andrew P. Furman

Overview

WAYNE PENELLO AND ANDREW FURMAN have spent the better part of forty years investigating traditional hedging practices and innovating a better solution. And that innovation put them on a path to invent a groundbreaking approach to hedging.
Risk Is an Asset tells the story of that invention, and it will transform the way you think about hedging strategies. What you will learn by reading this book is that effective hedging is not a decision, it is a process they call “Process Risk Management,” or PRM. It is guided by risk metrics expressed in the same budgetary terms used to measure the success of your business. PRM helps each firm maintain focus on its own budgetary success and avoid the trap of trying to outguess the market.
Why is measuring risk in budgetary terms important? Because if you measure the wrong things, you are unlikely to get the results you want.

Product Details

ISBN-13:	9781950863020
Publisher:	Advantage Media Group, Inc.
Publication date:	08/11/2020
Pages:	240
Product dimensions:	6.10(w) x 9.10(h) x 1.00(d)

About the Author

WAYNE PENELLO is the president and founder of Risked Revenue Energy Associates (R^2 or “R squared”). Since 2001, the firm has been developing financial solutions for corporations and private equity firms that wish to enter, optimize, or exit the energy-trading/marketing arena. R^2 currently assists clients with the management of more than $65 billion in assets. In 2010, Mr. Penello was awarded a patent for R^2’s methodology for quantifying risk (US Patent 7,822,670 B2). He has forty years of market-making, option-trading, and asset-management experience in the energy industry. Mr. Penello began his career on the New York Mercantile Exchange, where he was a market maker and served as ring chairman of options trading.

Subsequently, he held positions managing globally distributed energy assets for Vitol S.A., Vitol U.S.A., Tenneco Gas Marketing, and Torch Energy. Mr. Penello was formerly a research scientist. He holds a master’s degree in marine sciences from Stony Brook University and an undergraduate degree in marine biology from Southampton College.

ANDREW FURMAN has thirty-five years of experience in energy and trading. For the past twelve years at R^2, he has delivered hedge solutions to senior management of public corporations, private firms, institutions, and utilities. Prior to joining R^2, Mr. Furman was a managing member of Atlantic Capital Consultants, a member firm on the NYMEX. At Atlantic, he designed the commodity options training and risk-management platform, which launched the careers of many successful professionals in the energy industry. After serving as a managing director at two hedge funds, he assisted in the growth of R^2 through the deployment of its patented analytics. A risk-management and financial-engineering expert, Mr. Furman received a bachelor of science degree in chemical engineering from MIT.

Table of Contents

Introduction Learning to Manage Uncertainty 1

Chapter 1 Identifying and Managing Risk 15

Chapter 2 Facing the Facts 31

Chapter 3 Hedging Risk to Achieve Success 45

Chapter 4 Organizing the Problem and Data 63

Chapter 5 Quantifying Risk 83

Chapter 6 PRM Using Success Metrics 99

Chapter 7 Tactical Hedging 119

Chapter 8 Consumer Hedging 137

Chapter 9 Producer Hedging 167

Chapter 10 Midstream Hedging 191

Chapter 11 One Process 203

Conclusion Turning Risk into an Asset and Uncertainty into a Strategic Advantage 215

Epilogue 219