Given the current and future commodity price volatility, thorough commodity risk management is important for corporates to understand their commodity exposures.
With the developments and progress in the commodity risk management area, organizations should review their non-core commodity risks to evaluate the potential benefits of risk reduction and cost saving that could be achieved by implementing a framework to effectively manage these commodity risks.
The treasury function has established structures and policies that closely tie in with this commodity risk perspective, as they are already responsible for monitoring and hedging an organization’s FX and interest rate risk. Treasury can leverage these policies to easily gain a centralized view of the complete economic exposure, taking advantage of economies of scale and natural hedging opportunities.
With this in mind, the modern treasury function is well positioned to manage these commodity risks and champion the potential benefits while serving as the risk management center of an organization, creating a holistic risk management approach.
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