Common use of Market Risk Limits Clause in Contracts

Market Risk Limits. The market risk measurement methodologies described in this section are the agreed methods for measuring and assessing market risk by the RMC. Such methodologies will be used to ensure that all significant sources of market risk are identified, quantified and reported. Furthermore, the Company has established a risk limit system consistent with the Company’s risk management philosophy as defined in section 1.2. The aggregate limit for the amount of risk to be incurred by Xxxxxxx Resources, and the broad structure of the limits is approved by the Board of Directors. The allocation of the aggregate limit to the business units and the structure of more specific limits are approved by the RMC. The Supply / Trading and Marketing Officers determine the further allocation of risk limits across trading and marketing books. If any of the aggregate limits of the Senior Commercial / Trading Managers are exceeded without obtaining a waiver prior to the breach, a violation occurs and the Chief Risk Officer or designee will notify the Xxxxxxx Operating Resources LLC Risk Management Policy Privileged and Confidential - 12/5/2011 President and COO / CFO. Based on this discussion, the Chief Risk Officer will determine whether to convene a special meeting of the total RMC or a subset of this group to discuss a course of action with the appropriate senior commercial / trading manager(s). Depending on the results of this discussion, a determination will be made regarding any specific steps to cure the violation, either by getting the position within the approved limits (typically within the next day) or by obtaining a waiver from the President/CEO up to his control limit. As long as the aggregate level remains under the Xxxxxxx President’s limit, there is no requirement that specific actions be taken to adjust the position, though a waiver must always be granted until the position is brought within limits. System Supply and System Optimization activities (refer to Portfolio Definitions above) that are considered necessary to mitigate risk and/or meet obligations can also continue without restriction. If the losses exceed the President’s limit, the Board of Directors must also be notified. Depending on the Board of Directors response, actions may or may not be required. Any violation beyond the President/CEO’s limit must be cured by the next day unless authorization is provided by the AJI Board of Directors’ President or designee. The following table summarizes the limit authorizations that are required and reporting frequency/responsibility: Limit Structure Approved By Reporting Responsibility Reporting Frequency Position Limits Board of Directors Middle Office Daily Stop Loss Limit * Board of Directors Middle Office Daily Value-at-Risk* Board of Directors Middle Office Daily Specific Portfolio Limits RMC Middle Office Daily Credit Limits Board of Directors Director of Credit Daily * Discretionary and system optimization trading only