Risk Assessment And Control Of Wine Fund

This essay mainly covers the risks that the Wine Fund will meet. There will be fivetypes of risk in the Fund. The First is environment risk, which includes political risk,tax risk, liquidity risk, information risk and economic crisis. The second is weather risk.Grape and grape wine are agriculture products. They will be certainly affected byweather like light, rain, temperature and insect pest. In Bordeaux, people call the yearthat has satisfactory weather as “A Good Year”. The wine from the Good Year willhave a good price; while in bad weather (the Bordeaux people never use the word“Bad” and instead they like to use “Classic”) the price will come down. But even in“Classic Year” some vineries can make very good wine. So it depends on the fundintelligence how to find these wines. The third is market risk that has three aspects:exchange rate, interest rate and price. Since the fund get RMB in China and buy winesin Europe, it raises a big risk of the rate between RMB and Eur dollar or between RMBand US dollars. In the essay, we offer a model to direct the Fund how to avoid this risk.The fourth is credit risk that can be from trade and storage process. The last risk isfrom management. As we know, whether the fund will be successful depends on themanagement ability. In this essay, We try to set up a management system andinspection mechanism in order to evaluate the management achievements and controlthe moral risk as well as psychological risk.