Risk Management: Hedging Strategies

Hedging is an advanced ______ management strategy used to offset potential loses or mitigate the impact adverse price movements in an asset, investment, or portfolio.

In the logistic and the transportation sector, hedging particularly may involve strategies to mitigate the risk associated with fluctuations in ______ prices, currency rates transportation costs and supply chain disruptions.

The theory of hedging in risk analysis aims to protect against adverse price movements while allowing for exposure to potential ______.

In hedging fuel, a company may purchase future contracts, or options contracts, or ______ agreements to trade fuel costs with another party at a fixed price.

Fluctuations in oil prices directly affect ______ fuel prices which will subsequently affect ticket prices.

Aviation industries like the South African Airways may use financial instruments such as ______ or future contracts to hedge against currency loses.

A company can therefore negotiate a fixed-rate ______ with carriers or use freight derivatives to hedge against fluctuations in transportation cost.

Hedging against supply chain disruptions, a company can maintain ______ stock or utilize buffer inventory to mitigate risk associated with shortage of stock due to supply chain disruption or unforeseen demand fluctuations.

Hedging in transportation offers several advantages which include ______ stability, risk mitigation, competitive advantage, financial planning, supplier relationships and risk diversification.

Hedging may also allow companies to provide better ______ and manage cash flows, as they can anticipate transportation costs with greater certainty, which will enable more accurate financial planning and budgeting.