Managing Commodity Price Risk

Chapter 5

Creating a Commodity Price Risk Management Strategy

This chapter builds upon the overarching concepts discussed in chapter 1, the short- and long-term forecasts developed in chapters 2 and 3, and the assessment of risk exposure and risk tolerance that influence the effort needed for managing price risk discussed in chapter 4. The process model that we propose in this chapter helps supply chain managers to select and to implement an appropriate risk management strategy when they expect commodity prices to increase in the short term, the long term, or both. This process approach provides flexibility for determining how to best manage commodity price risk in different circumstances. Although the overall process takes a long-range view ...