Sample interview questions: How do you assess and manage the company’s exposure to commodity price risks in treasury operations?
Sample answer:
Assessing Commodity Price Risks
- Identify Key Commodities: Determine which commodities pose the greatest risk to the company based on industry dependencies, geographic locations, and financial instruments utilized.
- Quantify Exposure: Calculate the magnitude of price fluctuations and their potential impact on cash flows, earnings, and balance sheet valuations.
- Assess Correlation: Analyze the relationship between commodity prices and other relevant financial variables, such as currency exchange rates and interest rates.
Managing Commodity Price Risks
- Hedging Strategies: Utilize financial instruments, such as futures, options, and swaps, to offset price risks and stabilize cash flows.
- Supplier Contracts: Negotiate supply agreements that include provisions for price adjustments based on market conditions.
- Diversification: Expand the compan… Read full answer