The company is CVR Energy 1. Secure the 2011 annual report and 10K for that company from its website and describe operations and location. 2. Prepare list of perceived risks 3. Apply the three general...

CVR Energy – Risk analysis 1
CVR Energy – Risk analysis
CVR Energy – Risk analysis 2
Introduction:
CVR Energy is engaged in petroleum refining and marketing and transportation of asphalt and
petroleum fuels. The company also operates a nitrogen fertilizer business. CVR Energy primarily
operates in the US. It is headquartered in Sugar Land, Texas and employs about 700 people. (10-
K Report, 2012)
The company recorded revenues of $4,079.8 million in the financial year ended December 2010
(FY2010), an increase of 30.1% over FY2009.The operating profit of the company was $92.1
million in FY2010, a decrease of 55.9% compared with FY2009.The net profit was $14.3 million
in FY2010, a decrease of 79.4% compared with FY2009. (10-K Report, 2012)
Risk Management:
A risk is defined by the Australia Standard for Risk Management (AS/NZS 4360:2004) as “…the
possibility of something happening that impacts on your objectives. It is the chance to either
make a gain or a loss. It is measured in terms of likelihood and consequence.” Risk management
refers to those schemes and possibilities which reduce the possibility of a risk occurrence and
help in mitigating risks that arise out of the risks. The objective of the risk management is to
identify, manage and mitigate the risk. The risks that arise out of business, risks that arise out of
financial decisions and risks that arise out of credit. Businesses are usually exposed to different
type of risks are continually looking out to manage these risks through a proper system of risk
management. Risk management is a process of risk assessment and so the identification of risks
is very important and credible to institutionalizing a process of risk management. A thorough
understanding of the organization and its business model including the internal and external
environmental condition is very important for understanding and analyzing risk and parameters
for risk. Organizations usually are exposed to many types of risks which an organization shares
with its environment by virtue of the organization operating in an environment risks
automatically emerge.
Risks faced by the company:
There are different risks in respect the petroleum business which affects the business:
Price volatility:
CVR Energy – Risk analysis 3
The price volatility of crude oil, other feed-stocks and refined products which have a material
adverse effect on the earnings and profitability of the company as well as the crude flows. This is
one of the biggest risks that is faced by the company as the continuous increase in the volatility
of the business effects the working and the operations margin of the company, this might have
the adverse effect on the cash flows of the company. These refining margins also have a negative
impact on the cash flows of the business. (10-K Report, 2012)
Disruption of the ability of the company to obtain an adequate supply of crude oil that could
reduce the liquidity of the company and increase the associated costs: CVS energy also have a
strong focus on purchasing different kinds of fuel from different companies across the globe
which highly affects the profitability and liquidity of the company. (10-K Report, 2012)
Operational risks
CVR Energy’s refining and...