Actively managing commodity risk for competitive advantage

Commodity price volatility has
reached umprecedented levels
over the last five years
Companies that proactively and effectively
manage their commodity risk will be in a
position to gain a competitive advantage

Companies faced with significant exposures to commodities are experiencing unprecedented challenges as a result of volatile and rising commodity prices fuelled by population growth, climate change and a growing prosperity. This in turn is having a direct impact on company performance and many companies who have issued profit warnings over the past few years have found this is partly being driven by rising commodity prices.

Market data indicates that this rise in commodity prices is more structural and will remain going forward, and companies therefore need to consider fundamental changes to their business model. This article discusses why organisations might consider commodity risk as a significant issue and sets out factors to consider when looking to set up a Commodity Risk Management (‘CRM’) function.