The HC Commodities Podcast – Credit Risk in Uncertain Times with Jan-Peter Onstwedder

Date: May 27, 2025
Host: Paul Chapman, HC Group
Guest: Jan-Peter Onstwedder (Risk executive, advisor, ENCO Insight Partner)

Overview

In this episode, Paul Chapman speaks with Jan-Peter Onstwedder about the critical, rapidly evolving role of credit and counterparty risk management in the commodities sector. Against the wild backdrop of recent geopolitical instability, rising interest rates, and fractures in free trade, they explore what makes credit risk in commodities unique, the organizational and philosophical approaches to navigating it, and how firms stress-test for the “unknown unknowns.” Packed with practical wisdom and cautionary tales, it’s essential listening for anyone tracking risk, resilience, and relationships in energy and commodities.

Key Discussion Points & Insights

1. What Is Credit Risk in Commodities?

[02:34]

• Credit risk is fundamentally “the risk that the company or entity you’re dealing with is not able or not willing to fulfill its obligations.”
• Not just about financial inability—can include regulatory, operational, or political obstacles.

  “There are import restrictions or export restrictions or capital controls or other things that governments or third parties can do to make it impossible for a company to fulfill its obligations.”
  — Jan-Peter Onstwedder [02:56]

• The distinction between credit risk (traditional lending) and counterparty risk (failure to perform on contracts) is less pronounced in commodities; both relate to obligations not being met.

2. Tools and Challenges in Assessing Credit Risk

[04:36]

• Assessment relies on:
  • Statistical/rating models (e.g., akin to credit scores)
  • Fundamental analysis (balance sheet, cash flow)
• Opaque sector: Many counterparties are private, information is delayed or sparse.

  “You can see companies publishing fairly rudimentary information as much as three to six months after the end of a financial close...so you’re talking about information 15-18 months out of date by the time you have it.”
  — Jan-Peter Onstwedder [06:52]

• Mitigants include:
  • Letters of credit from trusted banks
  • Physical collateral (e.g., title to commodity cargo)
  • Relying on house banks for trust in unknown counterparties

3. Geopolitics, Macroeconomics, and Rising Complexity

[09:10]

• Recent crises—COVID, Russia-Ukraine, tariffs, rising interest rates—have forced credit risk into the spotlight.
• Risk professionals have become de facto analysts of global political risk.

  “It is particularly difficult to understand the likelihood of changes in government regulations...that is just inherently less predictable. And yeah, that has become more important over time.”
  — Jan-Peter Onstwedder [11:31]

4. Organization: Balancing Commercial Urgency and Prudence

[12:05]

• Commercial teams push to close deals rapidly; risk teams must guard the downside.
• Avoid adversarial, “us-vs-them” dynamics:

  “If you’re in an adversarial relationship between the risk function and front office, then something’s gone horribly wrong.”
  — Jan-Peter Onstwedder [13:48]

• Building trust:
  • “Go listen to people...try and understand what they’re trying to do and why.” [15:27]
  • Mutual respect between front and middle/back office is crucial.
• Risk is one input among many in business decisions; clarity of decision-making process and delegation is key.

  “You need to think about the decisions we make as a business before you design your organizational structure—not the other way around.”
  — Jan-Peter Onstwedder [18:46]

5. Performance, Incentives, and Visibility

[21:12]

• The paradox: If risk teams do their job perfectly, nothing dramatic happens—and it’s invisible.

  “You may say my objective is to have no credit losses. But that’s not always the right objective…As a business, you need to set a risk appetite.”
  — Jan-Peter Onstwedder [22:28]

• Occasional losses are normal if within risk appetite; catastrophic, headline events are what must be avoided.

6. Global Nuance and the Legal Angle

[25:43]

• Regional legal and contractual differences greatly impact risk—bankruptcy laws, enforceability, local market practices.

  “A good credit risk manager becomes quite knowledgeable about the law…and those definitely need regional and local expertise.”
  — Jan-Peter Onstwedder [26:31]

• Rising demand for legal and risk professionals reflects growing complexity.

7. Stress Testing: Identifying “What If?” Scenarios

[28:58]

• Stress testing is both a supplement and a check on everyday risk models; not a panacea.
• It’s not only about imagining extreme events, but about deciding which are relevant and actionable.

  “A good stress test starts by thinking: what are the risks not covered by these everyday tools?”
  — Jan-Peter Onstwedder [30:23]

• Two approaches:
  • Top-down: “What if country X does Y?” (often too broad)
  • Bottom-up: “What would hurt us specifically?” (reverse stress test—what would have to happen to inflict defined losses)

  “I find…a more useful insight is to start thinking about what could hurt us, rather than trying to think of all possible scenarios.”
  — Jan-Peter Onstwedder [35:02]

8. Examples: Real-World Cascading Risks

US Treasury Liquidity Crisis ([37:38]):

• Many firms rely on U.S. Treasuries for liquidity. If that market fails, liquidity issues ripple—firms and their banks get hit at once.

  “The mitigant…is twofold: enough capital, and diversified liquidity—don’t have all your liquidity tied up in US Treasuries.”
  — Jan-Peter Onstwedder [39:48]

Tariffs & Export Controls ([40:18]):

• Sudden export bans (e.g., on rice or metals) can upend supply chains, pricing relationships, and contract enforceability.

  “If you’ve hedged onshore copper in the US with futures based in Europe…that relationship could easily break if it hasn’t already done so.”
  — Jan-Peter Onstwedder [41:20]

• Long-term contracts especially vulnerable; legal battles, force majeure, and operational unraveling can follow.

9. Technology and the Future of Risk

[43:53]

• AI and automation are transforming contract analysis—identifying exposure and clauses across many jurisdictions.

  “Being able to find every contract, pull out the appropriate clauses…would save a massive amount of time and reduce uncertainty.”
  — Jan-Peter Onstwedder [44:30]

• AI’s reach: reading financial statement footnotes, flagging unusual treatments, automating much of what human analysts previously had to do.
• Raises the risk of AI-driven, rapid contagion if algorithms act on the same triggers.

10. Preparedness and Contingency Planning

[48:05]

• The speed of modern markets means organizations must plan their responses to outlier events in advance.

  “You need to have a plan prepared…contingency plans, which is just really thinking through with a group of people: what would we do if the following happens, is incredibly useful.”
  — Jan-Peter Onstwedder [48:48]

Notable Quotes & Memorable Moments

• On the adverse power of an adversarial culture:

  “If you’re in an adversarial relationship between the risk function and the front office, truly adversarial, then something’s gone horribly wrong.”
  — Jan-Peter Onstwedder [13:48]

• On risk appetite and performance:

  “You need to set as a business...a risk appetite. What are the losses we can afford to take without endangering the business?”
  — Jan-Peter Onstwedder [22:29]

• On stress testing’s real value:

  “A good stress test starts by thinking about, well, what are the risks that are not covered by these everyday tools?”
  — Jan-Peter Onstwedder [30:23]

• On contingency planning:

  “It’s incredibly difficult in the heat of the moment to have that discussion. You need to think about it in advance.”
  — Jan-Peter Onstwedder [48:31]

Timestamps for Important Segments

| Segment | Timestamp | |------------------------------------------------------------- |------------ | | Defining credit/counterparty risk | 02:34–04:36 | | Tools: analysis, models, and unique opacity in commodities | 04:36–08:00 | | Geopolitical and regulatory risk impacts | 09:10–12:05 | | Building effective/risk-aware organizations | 12:05–18:28 | | Team incentives and risk appetite | 21:12–24:54 | | Need for regional/legal expertise | 25:43–28:18 | | Stress testing: philosophy and execution | 28:58–36:16 | | Example: US treasury liquidity stress | 37:38–40:18 | | Tariff/export control risks | 40:18–43:53 | | Technology’s role and future | 43:53–46:34 | | Contingency planning, rapid market moves | 48:05–48:57 |

Tone & Final Thoughts

Pragmatic, collaborative, and occasionally sobering, Jan-Peter Onstwedder offers an unvarnished view of both the intellectual and practical demands of credit risk management. Above all, he advocates for clear-eyed realism, humility, and relentless communication—//“It has to be a relationship of mutual respect. And you can only get that if people communicate clearly…”// [17:07]—as the bedrock of resilience in an industry perpetually roiled by change.

For more on risk, resilience, and risk management careers in the energy and commodities sectors, visit HC Group or explore ENCO Insights.