Oil, currencies, and commodity prices – where are they headed?


Now, if I knew the answer to that question, would I be writing this blog?

We probably all realize that oil shocks are not just possible, but rather likely, depending on the time horizon we choose. The potential impact is of the Black Swan variety – i.e. really big. So what is our role as procurement professionals armed with this knowledge? To only take risks with our eyes open, and not speculate on where oil might be headed in the short term – like this guy. http://tinyurl.com/25nxqyx

It is not just oil either…other commodities are prone to shocks as well, potentially even occurring at the same time. Are our business leaders prepared, and have we done our best to prepare them? My thoughts – procurement working with finance to understand where we are exposed and potentially accepting less quarterly profit to hedge that risk. There are off-the shelf derivatives for insuring against Black Swans, and if you are large enough, investment banks willing to customize them for you. Some traders have stood the test of time using just such a strategy.


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