Category 1

Category 2

Category 3

Category 4

Factor: financial strength

Strong

Good

Satisfactory

Weak

Factor: political and legal environment

No country risk

Limited exposure to country risk (in particular, offshore location of reserves in an emerging country)

Exposure to country risk (in particular, offshore location of reserves in an emerging country)

Strong exposure to country risk (in particular, inland reserves in an emerging country)

Very strong mitigation:

Strong offshore mechanisms

Strategic commodity 1st class buyer

Strong mitigation:

Offshore mechanisms

Strategic commodity Strong buyer

Acceptable mitigation:

Offshore mechanisms

Less strategic commodity Acceptable buyer

Only partial mitigation:

No offshore mechanisms

Non-strategic commodity Weak buyer

Factor: asset characteristics

Commodity is quoted and can be hedged through futures or OTC instruments. Commodity is not susceptible to damage.

Commodity is quoted and can be hedged through OTC instruments. Commodity is not susceptible to damage.

Commodity is not quoted but is liquid. There is uncertainty about the possibility of hedging. Commodity is not susceptible to damage.

Commodity is not quoted. Liquidity is limited given the size and depth of the market. No appropriate hedging instruments. Commodity is susceptible to damage.

Factor: strength of sponsor (including public private partnership)

Very strong, relative to trading philosophy and risks

Strong

Adequate

Weak

Extensive experience with the type of transaction in question. Strong record of operating success and cost efficiency.

Sufficient experience with the type of transaction in question. Above average record of operating success and cost efficiency.

Limited experience with the type of transaction in question. Average record of operating success and cost efficiency.

Limited or uncertain track record in general. Volatile costs and profits.

Strong standards for counterparty selection, hedging, and monitoring

Adequate standards for counterparty selection, hedging, and monitoring

Past deals have experienced no or minor problems

Trader has experienced significant losses on past deals

Excellent

Good

Satisfactory

Financial disclosure contains some uncertainties or is insufficient

Factor: security package

First perfected security interest (1)provides the lender legal control of the assets at any time if needed.

First perfected security interest provides the lender legal control of the assets at any time if needed.

At some point in the process, there is a rupture in the control of the assets by the lender. The rupture is mitigated by knowledge of the trade process or a third party undertaking as the case may be.

Contract leaves room for some risk of losing control over the assets. Recovery could be jeopardised.

Strong insurance coverage including collateral damages with top quality insurance companies

Satisfactory insurance coverage (not including collateral damages) with good quality insurance companies

Fair insurance coverage (not including collateral damages) with acceptable quality insurance companies

Weak insurance coverage (not including collateral damages) or with weak quality insurance companies