Reducing risk of commodity exposures
Whether a company’s risks are related to fuel, metals or other materials, hedging commodities continues to gather more attention. Commodity risk is complicated, available tools are advancing, and responsibility for mitigating risk can fall across disparate departments like procurement, treasury and supply chain.
With an effective risk management program, companies can consolidate their view of risk and the benefits that can be derived from reduced volatility and improved forecasting.
By understanding market swings and correlations, quantifying net exposures, valuing hedges and applying hedge accounting, a more effective risk management strategy can be established.
How Chatham helps reduce commodity-exposure risk
Comprehensive Approach: Chatham looks at commodity risk holistically, evaluating correlations by commodities and currencies. Because many dynamics are involved in commodities, some companies need greater structure and process in reaching timely decisions. Others need technology applications to handle valuations. For many, it’s the combined expertise in hedging, hedge accounting, technology applications, and regulatory navigation that enable it to manage risk.
Knowledge and Know-How: Hedging commodities is far less transparent than hedging foreign currencies or interest rates. It is critical to have the knowledge and market know-how to make sound decisions and also understand the associated regulatory requirements. Chatham’s presence in the market every day, executing transactions for a wide variety of clients, gives us the unique perspective to design an optimal program that meets your economic and risk management goals.
The dynamics and operational elements associated with commodity risk also inform our hedging strategies and ability to arrange credit, efficiently execute and ensure proper hedge accounting.
Tailored Solution: We support companies just starting risk management programs as well as companies with existing programs that are constrained by current solutions, such as those dependent on spreadsheets. Chatham’s independent perspective helps clients find the right solutions for successfully managing commodity risk.