Factors Affecting Shell Risk Management

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The first factor that affects Shell risk management is the fluctuating prices of crude oil, natural gas, oil products and chemicals. The fluctuating prices of oil are caused by the demand and supply in the market. Demand and supply in the market is affected by operational issues, natural disasters, weather, and political instability. This is the OPEC risk of Shell, which the oil price is controlled over by OPEC. As in 2014, oil supply was growing faster than demand even though it grew at a slower pace. During second half of 2015, the supply from USA was decreased, but the new technology and focus on most productive area can help to solve the issue. Shell was using new technology and a strategic place to continuously provide the crude oil to minimize the risk. The fluctuating prices of crude oil will affect the cash flows and earning of Shell. For example, revenue of Shell will decrease and might lead to less profitable when the crude oil price is low. In contrast, high crude oil price will decrease the demand of the crude oil. So, Shell is trying to minimize the effect of fluctuating price on their company. Next, the risk factor of Shell is to balance between the environment and development of their business. The environment is the global risk to Shell. Shell cannot control the environmental risk but it still will occur. Shell only can reduce the risk but cannot eliminate it from happening. Shell needs to concern about the environmental when doing their business especially

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