What are the Challenges in Managing Commodity Risk?
Managing commodity risk involves several challenges, including:
Market Volatility: Unpredictable price movements can complicate risk management efforts. Complexity: The use of financial instruments for hedging requires specialized knowledge and expertise. Regulatory Compliance: Adhering to regulations governing financial transactions and risk management practices. Operational Risks: Ensuring that internal processes and systems are robust enough to support risk management activities. Credit Risk: The risk that counterparties in hedging transactions may default on their obligations.