Purpose: To provide a structured approach for identifying, evaluating, and mitigating risks associated with agarwood and other high-value plant trade for both traders and investors.
A. Types of Risks
- Regulatory and Legal Risks:
- Non-compliance with CITES permits, source codes, and NDF requirements
- Violations of national laws, administrative orders, or trade quotas
- Risk of fines, seizures, or trade suspension
- Operational Risks:
- Inaccurate chain-of-custody records or traceability gaps
- Mislabeling of species, product forms, or quantities
- Processing, storage, or shipment errors
- Market and Financial Risks:
- Price volatility for agarwood products
- Counterparty defaults or unreliable buyers
- Currency fluctuations affecting international trade
- Reputation and ESG Risks:
- Negative publicity from illegal or unsustainable trade
- Failure to meet environmental, social, or governance standards
- Loss of investor confidence or market access
B. Risk Evaluation
- Assess likelihood and impact of each risk category
- Prioritize risks based on potential financial, legal, and reputational consequences
- Use data from traceability systems, audit trails, and market analysis
C. Risk Mitigation Strategies
- Regulatory Compliance:
- Ensure permits, certificates, NDFs, and quotas are current and accurate
- Maintain robust chain-of-custody and traceability systems
- Operational Controls:
- Implement digital record-keeping and auditing procedures
- Train staff on compliance, documentation, and quality control
- Financial and Market Measures:
- Diversify buyers and markets
- Use contracts with clear terms and dispute resolution mechanisms
- Monitor price trends and hedge currency risks where applicable
- Reputation Management:
- Adopt ESG-aligned practices
- Promote transparent sourcing and sustainability certifications
- Engage with stakeholders, authorities, and the public proactively
D. Practical Recommendations
- Conduct regular risk assessments at farm, processing, and trade levels
- Integrate risk management with traceability, audit trails, and compliance reporting
- Maintain incident logs and response protocols for non-compliance or market issues
- Review and update risk mitigation plans based on evolving regulations and market conditions
Learning Outputs
- Understanding of key regulatory, operational, financial, and reputational risks
- Ability to evaluate and prioritize risks for traders and investors
- Knowledge of mitigation strategies and integration with compliance systems
- Skills to implement proactive risk management for sustainable and legal trade