By implementing an ongoing risk management program, clients gain lucidity of purpose, better risk mitigation, and potential cost reductions through improved transaction structures that eliminate extremes in commodity and emissions transactions. Part of our service is the development of policies and procedures for transparency of program implementation.

With an assessment of risk exposures, a firm can define its risk management objectives and impose reasonable boundaries on those exposures. With risk tolerance boundaries established, Hedging Decision Protocols (HDPs) are simulated to contain risk within confidence bands across a distribution of possible outcomes.

Pace then formulates a recommended set of HDPs, consistent with the optimized decision rules and the client’s core business objectives. Typically, Pace recommends four dimensions of HDPs:

• Programmatic Protocols accumulate positions systematically, prior to the onset of acute volatility. Programmatic hedges pre-empt overdependence on defensive hedges.
  
  
• Defensive Protocols respond to the need to defend tolerable boundaries during periods of rising forward-market prices. Defensive protocols are typically set up in tiers for appropriate protection while inhibiting over-reaction to short-lived market movements.
  
  
• Discretionary Protocols promote favorable outcomes through the constrained exercise of judgment via market-timing transactions. Pace has developed proprietary, quantitative indicators to provide unbiased insight as to market opportunities.
  
  
• Contingency Protocols monitor the risk of out-of-market outcomes and provide a structured response to mitigate regulatory inquiries.

The interaction of HDPs elevates your risk management capabilities and specifies the financial & physical instruments and conditions necessary to effectively manage your energy and emissions portfolio.