The Research On The Operational Risk Prevention Of Commodity Fuures Of TTi Group

Enterprises'development, particularly in manufacturing industries, raw material cost control directly impact enterprises'profit, which cost of raw materials have accounted for a very great proportion, so fixing raw material prices are favorable to make sure of enterprises'stable production. In the past recent years, global commodities price showed dramatic fluctuation, this made many enterprises are difficult to plan their production under a certain costs. Hedging by futures market just can solve this problem. TTi group is one of the present global leading power tool suppliers, which raw material cost occupies a majority of total products cost, therefore, to implement hedging by futures market is significant helpful to control its cost.The SRB (State Reserve Bureau) copper events caused CNY920 million lose to China due to mistaken trading by a dealer of SRB. It causes many people to discuss and analyze how to manage the dealing risk from futures market. This paper studies deeply the SRB copper events with futures operational risk control theories. The main reasons are that lack of a rounded control mechanism and an authorized and sound organization inside to manage risk. Enterprises must constantly improve their control programs with environmental changes to avoid futures dealing risk. There are many experiences to adopt from the SRB copper events for TTi group's hedging activities in futures market, such as part of members no position qualification and poor financial knowledge to top management in futures commission and imperfect internal control mechanism etc.. This paper suggests to properly eliminate these abuses from two aspects. One is enterprises must constantly improve their internal control mechanism for futures trading; The second is government must provide a orderly futures market environment for enterprises hedging. TTi group and other many enterprises will get more advantage for material cost control to make sure production stability and national economy development, if above two aspects are implemented by enterprises and government.