On 4 March, ESSEC Asia-Pacific welcomed Mr. Jacky Hok, Global Head of Credit and Back Office, Total Marine Fuels, to share his knowledge about credit management as part of a series of professional talks organised by Career Services at ESSEC Asia-Pacific. During the session, Mr. Hok defined credit, spoke about why credit management is crucial, as well as how to do proper credit management. In terms of career advice, Mr. Hok also shared some obstacles he faced in his job.
Mr. Hok defined credit as the provision of resources, for example granting a loan, by one party to another party where the second party does not reimburse the first party immediately, thereby generating an exposure (also known as debt).
He spoke about how after the Lehman Brothers crisis, the industry shifted towards a greater emphasis on control, credit and procedure. In line with this trend, banks are now hiring more and more people who will be able to help them comply to the various new regulations in the banking industry. Mr. Hok added that compliance risk and procedure have emerged as the best compensated jobs in the service sectors. However, he highlighted that hiring too many staff focusing on compliance could also hinder the business due to a potentially excessive amount of time and resources devoted to this area.
Mr. Hok also gave an overview of the organisational structure of Total’s trading division, made up of traders, operators, the middle office and the back office.
The 3 Kinds of Jobs in Credit
Following this, Mr. Hok spoke about credit, explaining that it is divided into 3 kinds of jobs, namely:
- Information Gathering: It is important to know who you are dealing with, including ownership details, financials, public ratings, credit reports and possible risks
- Setting up Credit Lines: Being able to handle the pressure from other stakeholders is of utmost importance
- Approval and Follow-up: Be able to balance the needs of various stakeholders when assessing credit risks
Mr. Hok also introduced the major elements of credit risk analysis, including:
- Country: Sovereign and country risks as well as local legal issues
- Business Profile: Volatility of earnings, event risk, management, competition, regulations
- Ownership: Access to capital and support for subsidiaries
- Market Risk Indicators: Public debt ratings
- Environment: Business cycle, macroeconomic conditions, condition of capital markets
- Financial Profile: Cash coverage, returns, capital structure, sources of liquidity
Methods to mitigate risks
Speaking about methods to mitigate risks, Mr. Hok explained that in the commodities market, there are two ways to reduce risk:
- Mutual Agreements with clients, including but not limited to:
- Bilateral margining
- External channels, including but not limited to:
- Silent coverage with banks
Subsequently, Mr. Hok shared his insights gathered from conducting trading analysis with trading houses. He explained that there is a growing number of trading houses, and they are covering everything geographically and all segments of products. This gives them an edge as they have a more comprehensive understanding of the market.
Mr. Hok also spoke about the business strategy of trading houses, including being flexible and efficient, having a strong reward culture, having the ability to leverage on market inefficiencies to their advantage, being able to use volatility to their advantage for speculation as well as being an entry point for many small players.
To Mr. Hok, as a credit manager, it is important to be aware and clear of the different legislations across countries. He also emphasised the importance of interpersonal skills, including:
- Being able to work with different departments, be organised, meticulous, structured, adept at number crunching, be fast and sharp
The professional talk by Mr. Hok provided students with a glimpse into working in Commodity Trading, introducing them to the roles and responsibilities available, as well as what they should take note of when pursuing their career in the respective positions.