Businesses that rely on the purchase of commodities for their product or service can suffer from unexpected costs if commodity prices become volatile.

As rapid demand for raw materials in countries such as China pushes up prices globally, the need to efficiently model and hedge these risks has never been greater.

Critical questions you need to consider

• Have you assessed how your business is exposed to risk from changes in price to any of your inputs of production?

• Do you have a risk strategy to cope with volatility?

• Are you aware of the potential risk management solutions in addition to insurance and the hedging market?

• Do you need to source your supplies in a different way to cope with price volatility, and have you assessed the expense associated with this?

• Are you getting value-for-money in the traditional insurance market?

• Do your hedges accurately match and cover your underlying risk?