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A Year in Risk Management

by Ashish Advani, Director, Derivatives, Royal Caribbean International

About Royal Caribbean International

Royal Caribbean International (RCL) was founded in 1969 and now has a fleet of 39 ships with a capacity of 78,650 passengers. The cruise schedule includes Alaska, Asia, Australia/New Zealand, Bahamas, Bermuda, Canada/New England, Caribbean, Europe, Hawaii, Mexico, Panama Canal and South America, appealing to a wide range of customers of all ages. RCL is quoted on the New York Stock Exchange and Oslo Stock Exchange and achieved 2007 revenues of $6.1bn, an increase of $900m on the previous year.

Introduction

In February 2008, I wrote an article for the TMI Hedge Accounting Guide 2008, published in association with Reval, on risk management and hedge accounting at RCL. One year on, while some issues have remained the same, such as our use of technology, managing risk in a new environment is very different. In the first part of this article, I have transcribed most of the article from last year, and in the second, illustrated the differences in the way that we hedge our risks today.

Part One: Hedging and Hedge Accounting in 2008

Hedging at RCL

Royal Caribbean has three areas of hedging activity:

i) Fuel