What are the Top 5 things companies should do when establishing a commodity price risk profile?
Minneapolis, MN | January 24, 2024 | By: John Trefethen, Director and Co-Founder
Today’s HedgeStar Top 5 list is what are the Top 5 things companies should do when establishing a commodity price risk profile?
Number Five – Commodity Price Exposure and Sensitivity – Identify and quantify the commodities that your company is exposed to. Understand how changes in the prices of these commodities can impact your business.
Number Four – Supply Chain Dynamics – Analyze your company's supply chain to identify vulnerable points where commodity price fluctuations could have significant impact.
Number Three – Market and Regulatory Trends – Stay informed about market trends and regulatory developments in the commodity markets relevant to your business. Changes in regulations, geopolitical events, and market dynamics can all influence commodity prices.
Number Two – Hedging Strategies – Develop effective hedging strategies to manage commodity price risk. Consider using financial instruments such as futures, options and over-the-counter derivatives to mitigate exposure to price volatility.
Number One – Scenario Analysis and Stress Testing – Conduct scenario analysis and stress testing to assess the resilience of your business to extreme commodity price movements.
Up next: Look for another HedgeStar Top 5 list next week.
Author: John Trefethen, Director and Co-Founder
Mobile: 612-868-6013
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Email: jtrefethen@hedgestar.com
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