Managing Commodity Price Risk

CHAPTER 2

Assessing Price Risk Exposure and Risk Tolerance

As described in Chapter 1, commodity price volatility affects almost all organizations, either directly through their own purchases, or indirectly through their supply chains. Since commodity prices are usually outside the control of any one organization, supply chain professionals are rarely able to directly influence commodity prices. Instead, supply chain managers must understand their organizations’ exposure to price risk and decide if, and how, their organization should manage commodity price risk. Chapters 3 and 4 will explain how to analyze price movements and develop forecasts if the risk exposure warrants direct attention. Chapters 5 and 6 describe a variety of approaches for ...