Why All Businesses Should Recognize the Need for Commodity Risk Management
While Commodity Price Risk Management (CPRM) originated in the commodity players, such as miners, refiners, energy producers, and so on, it’s increasingly being adopted by businesses that have significant commodity costs in their cost base but whose core business lies elsewhere – such as FMCG, retailers, manufacturers, and so on. For the many not the few The volatility of the commodities market poses great risks for many businesses that buy in commodities or raw materials. Unless a business is able to pass price changes directly onto the end customer, simply absorbing the impact of a price increase can lead to periods of significant losses. In contrast, business whose core business is the buying and selling of commodities, with established CPRM practices, or put another way hedging programs, in place are able not only to weather the storm when prices fluctuate in the markets, but also benefit from volatility. Many organizations are not even aware of the value of the...