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Commodity Contracts Dealing in the US - Industry Risk Rating ReportProduct Type: Market Research ReportPublished by: IBISWorld Published: January 2008 Product Code: R538-17149 Description Industry Risk Ratings SynopsisThis Industry Risk Ratings report from IBISWorld evaluates the inherent risks associated with the Commodity Contracts Dealing in the US industry. Industry Risk is assumed to be 'the difficulty, or otherwise, of the business operating environment'. The report looks at the operational risk associated with this industry. Three types of risk are recognized in our analysis. These are: risk arising from within the industry itself (structural risk), risks arising from the expected future performance of the industry (growth risk) and risk arising from forces external to the industry (external sensitivity risk). This approach is new in that it analyses non-financial information surrounding each industry. Industries are scored on a 9-point scale, where 1 represents the lowest risk and 9 the highest. The Industry Risk score measures expected Industry Risk over the coming 12-18 months. Industry Definition This industry comprises establishments primarily engaged in acting as principals (i.e., investors who buy or sell for their own account) in buying or selling spot or futures commodity contracts or options, such as precious metals, foreign currency, oil, or agricultural products, generally on a spread basis.Spreaders enter into contracts with the hope of profiting from an expected change in price relationships. There are a number of different types of spreads. For example, a speculator may purchase (go long in) a contract expiring in one contract month and sell (short, or go short in) another contract on the same underlying security expiring in a different month, also called 'calendar spreads.'Spreaders may purchase and sell the same contract month in two different but economically correlated security futures contracts. If a speculator believes that one underlying security will have a stronger growth than another underlying security over a certain time period, the spreader may purchase the former security and sell the latter, both with expiration at the end of the time period. Lastly, speculators may engage in arbitrage, which is similar to spreads except that the long and short positions occur on two different markets. This position can be established by taking an economically opposite position in a security futures contract on another exchange, in an options contract, or in the underlying security. Report Contents Risk Overview The Risk Overview chapter includes sections on Industry Definition and Activities, Industry Risk Score and Risk Rating Analysis. The Industry Definition and Activities section provides a detailed definition of the activities carried out by operators in this industry as defined in NAICS. A list of the primary activities of the industry is also included. The Industry Risk Score section provides the Overall Industry Risk Score as well as the Risk Scores for each of the three types of risk covered that combine to form the Overall Industry Risk Score. These three types of risk are Structural Risk, Growth Risk and External Sensitivity Risk. The Risk Rating Analysis section discusses the underlying factors contributing to the Overall Industry Risk Score. Structural Risk The Structural Risk chapter looks at risk arising from within the industry itself and provides a detailed discussion of the industry’s level of exposure to seven key indicators. These key indicators are Barriers to Entry, Competition, Industry Exports, Industry Imports, Level of Assistance, Life Cycle Stage and Volatility of Industry. The Overall Structural Risk Score is a weighted aggregation of these seven key indicators. Each of the key indicators is discussed in detail in this section. Growth Risk The Growth Risk chapter looks at risks arising from the expected future performance of the industry. The Overall Growth Risk Score is determined by amalgamating the scores for Recent Industry Growth and Forecast Industry Growth. Detailed analysis is provided discussing the reasons for the growth scores of both. Sensitivity Risk The Sensitivity Risk chapter looks at risks arising from forces (sensitivities) external to the industry. The Overall External Sensitivity Risk Score is determined by identifying the most significant (up to 6) external factors and weighting them to represent how significant each sensitivity is to the performance of the industry. Examples of External Sensitivities are Exchange Rates, Interest Rates, Commodity Prices and Government Regulations. There is also a detailed analysis of the affect each of the sensitivities has on the industry, including charts and data tables where appropriate. Industry Risk and Industry Risk Scoring Methodology This chapter provides an overview of how IBISWorld defines Industry Risk and discusses the methodology used to arrive at an Industry Risk Score. There is also a table that provides a definition of the seven levels of Industry Risk. Table of Contents
Industry Definition & Activities Industry Risk Score Risk Rating Analysis STRUCTURAL RISK Barriers to Entry Basis of Competition Domestic and International Markets Industry Assistance Life Cycle Industry Volatility GROWTH RISK Recent Growth Analysis Forecast Growth Analysis SENSITIVITY RISK World Price - Volatility - Agriculture Index World Price - Volatility - Minerals - Gold World Price - Volatility - Minerals - Iron Ore World Price - Volatility - Energy - Oil Exchange Rates - Trade Weighted Index - Volatility INDUSTRY RISK AND INDUSTRY RISK SCORING METHODOLOGY What is Industry Risk? The Industry Risk Scoring Methodology Risk Rating Score Definition |
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