A counterparty limit is not a vibe check
Apply risk appetite thinking to a counterparty exposure decision in a physical commodity trade.
The move: turn "good relationship" into risk criteria. A commodity credit decision should connect commercial strategy with exposure boundaries. COSO ERM is useful because it does not isolate risk as a back-office objection; it asks how risk appetite supports performance. The strongest trader does not hide from credit. They pre-wire the structure: current exposure, requested exposure, payment record, concentration, collateral, and exit route. Then the commercial question becomes clearer: is the margin worth the credit shape we are being asked to carry? If the answer is no, that still leaves negotiation moves. Reduce volume, shorten tenor, require LC, add parent…
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