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HEDGING SOLUTIONS
After taking on your all the specifics of your circumstances, further analysis will then allow us to put forward and advise you on what we believe to be the most effective and efficient means of physical trading strategy and products. These may be OTC or exchange traded. Moreover, beyond risk management solutions, we can provide for working capital finance to fund positions. Our remuneration is taken care of via a transparent advisory fee, clearly delineated from the pricing of any structures which we may advise is suitable for your circumstances.Measure Twice, Cut once
Our close relationships with other market participants, means we have excellent visibility over flow and also ‘on the ground’ intel from our own origination offices and market contracts. Working together with you, and our respective risk teams, we can help is identifying, managing and mitigating the risks as they appear in respect of your positions and trading.
Hedging performed in an efficient way should lead to real value addition to any company. There are many aspects involved in considering appropriate solutions, including tenor, liquidity and transparency – all of which of course impact pricing. We believe we have unrivalled ag industry expertise on our hedging desk, and can bring the benefit of that acumen to bear on your performance.
Whilst futures contracts are typical used in hedging programs, we are able to provide support in a range of hedging techniques.
An effective hedging program can reduce cash flow volatility, which can be very cost effective when using exchange traded instruments, can also bring accounting benefits when the P&L is taken into consideration
ARIA Commodities
How should Corporates Address Commodity Price Risk?
Whilst the nature of price risk varies from commodity to commodity, industry to industry, ultimately every company involved in procurement of commodities, will need to address effective price management – in other words ‘procurement commodity risk’. Having acquired a position, corporate now face ‘trading risks’, which are related to the financial risk and hedging needs that being involved in the physical supply chain brings. Furthermore, inventory price risks, basis risk and margin risk are all considerations that corporates need to take on board. It may be that it is possibly to pass some of these risks onto the customer through the prices of finished goods, or even negotiating with suppliers fixed prices. However, it may be that pricing of procurement is subject to the benchmark pricing offered by futures markets – all these scenarios are aspects that our team is happy to advise and guide you through.
Benefits of hedging commodity price risk
Fluctuating commodity prices can pose a mortal risk to working capital and cash flow for any business. Liquidity difficulties can quickly compel the need to take on additional short term funding at disadvantageous rates. An effective hedging program can reduce cash flow volatility, which can be very cost effective when using exchange traded instruments, can also bring accounting benefits when the P&L is taken into consideration.
From hedging, to market intelligence and even working capital or margin funding, we seek to provide a suite of services that combined can form the basis of a broad enterprise risk management solution.
Whilst the nature of price risk varies from commodity to commodity, industry to industry, ultimately every company involved in procurement of commodities, will need to address effective price management – in other words ‘procurement commodity risk’. Having acquired a position, corporate now face ‘trading risks’, which are related to the financial risk and hedging needs that being involved in the physical supply chain brings. Furthermore, inventory price risks, basis risk and margin risk are all considerations that corporates need to take on board. It may be that it is possibly to pass some of these risks onto the customer through the prices of finished goods, or even negotiating with suppliers fixed prices. However, it may be that pricing of procurement is subject to the benchmark pricing offered by futures markets – all these scenarios are aspects that our team is happy to advise and guide you through.
Benefits of hedging commodity price risk
Fluctuating commodity prices can pose a mortal risk to working capital and cash flow for any business. Liquidity difficulties can quickly compel the need to take on additional short term funding at disadvantageous rates. An effective hedging program can reduce cash flow volatility, which can be very cost effective when using exchange traded instruments, can also bring accounting benefits when the P&L is taken into consideration.
From hedging, to market intelligence and even working capital or margin funding, we seek to provide a suite of services that combined can form the basis of a broad enterprise risk management solution.