Risk Management

Investor Capital Preservation: How We Ensure Security 

  1. Bank Guarantee & SBLC-Backed Trust Account

  • Investor Protection: Funds are secured in a Bank Guarantee with the investor’s bank, ensuring capital is never at risk.

  • Risk-Free Environment: The Standby Letter of Credit (SBLC) guarantees the trade but is never drawn upon for trading.

2. Multi-Layered Risk Mitigation

  • Trader’s Strong Balance Sheet: The trader finances fuel purchases using its own capital, ensuring investor funds remain untouched.

  • Banking Facilities Cover Trade Payments: The trader’s bank provides timing flexibility, ensuring seamless settlement of trade obligations without reliance on the SBLC.

  • Strategic Bank Partnerships: Stakeholding in managing SBLCs, secure trade settlements & fund protection and standby role as an Exit Buyer

  • Comprehensive Trade Insurance & Risk Hedging

    Phycom utilises trade credit insurance, cargo insurance, and financial hedging strategies to safeguard against unforeseen risks.

3. Legal & Contractual Protections

  • Ironclad Trade Contracts: Enforced with strict dispute resolution clauses and performance guarantees.

  • Escrow-Based Payment Structures: Ensuring funds are allocated only when contract conditions are met.

  • Third-Party Verification: Independent verification of trade execution, product quality, and logistics compliance.

4. Trade Process Risk Mitigation

  • CIF (Custom, Insurance, Freight): The supplier retains responsibility for the diesel until testing at the port of delivery.

  • Index Floating Pricing: All trades are structured with index-based pricing to mitigate exposure to price volatility.

  • SGS Third-Party Testing: Independent verification of product quality and quantity through SGS ensures compliance and transparency.

How Funds Are Used

The Investor’s Bank Guarantee is used to prove that the Trader has the financial capability to execute the trade.  The Bank Guarantee is converted into a Bank Instrument, Standby Documentary Letter of Credit (SBLC), by Phycom’s Bank and transferred to the selected Suppliers Bank as a Payment Guarantee. The Investors Bank Guarantee is not used as collateral for Trading Diesel, it is used as a Payment Guarantee. The only time the Bank Guarantee can be called upon is if there is a drawdown on the SBLC from Phycom’s Bank by the Supplier.

Bank Guarantee Risk

Phycom’s priority is to minimize the risk of drawing down capital against the Investors Bank Guarantee to fund a settlement shortfall. By avoiding any drawdown investors’ capital is never at risk and the investor receives their returns risk-free. Phycom achieves this by;

  1. Always having two exit Buyers available to purchase the Diesel for each Trade Cycle.

  2. Trading only in Rotterdam or Singapore Ports, which trade the highest volumes of Diesel and have many Buyers available ready to purchase the Diesel.

  3. Working with Traders who have a Balance Sheet strong enough to buy the Diesel should their Exit Buyer default on the payment timeline in the Sales and Purchase Agreement with the Supplier.

  4. Having a working relationship with the Phycom Bankers that give Phycom, a 15-day banking time line to on sell the Diesel after the SBLC has been drawn down, to refund the SBLC prior to calling on the Investors Bank Guarantee.

With the above protection in place, the chances of the Investors Bank Guarantee being drawn down is minimal in the Trading Process.

But if there is a drawn down the Investors Bank Guarantee is used as collateral.  Phycom manages the process to ensure that at all times the capital is protected.

It does this by managing the purchase of the asset, hedging against price volatility and ensuring they are held in a segregated client account in safe custody.  Phycom then ensures the asset is quickly sold and the proceeds immediately applied against the drawn-down funds.  Once this process has been completed the investment returns to its risk-free state to continue earning risk-free returns.

Due Diligence Checklist

Phycom’s Due Diligence Materials:

  1. Legal Contracts and Trade Agreements

  2. SBLC Trust Account Structure & Banking Partners

  3. Banking Oversight & Security Framework

  4. Insurance Policies Covering Trade & Cargo Risk

  5. Pre-Vetted Counterparty Agreement & Buyer Commitments

  6. Regulatory Compliance