Commodity Price Risk & Hedging Strategies Training Course

Course Overview

Learning Objectives

• Analyze how commodity price volatility affects revenues, costs, margins, cash flows, and budgets on Day 1.
• Identify and map commodity price exposures across procurement, production, sales, and financing activities.
• Quantify commodity exposures by volume, timing, and pricing formula and assess natural hedges.
• Evaluate commodity price benchmarks, pricing mechanisms, and sources of basis risk.
• Analyze the structure and functioning of spot, forward, futures, swap, and option markets for commodities.
• Apply hedging instruments, including forwards, futures, swaps, options, collars, and average price structures.
• Design hedging strategies, including hedge ratios, layered and rolling hedges, and hedge tenors, aligned with risk appetite and business objectives.
• Measure commodity risk using sensitivity analysis, value at risk, cash flow at risk, and stress testing.
• Develop hedging policies, risk limits, approval authorities, and segregation of duties for commodity risk management.
• Assess counterparty credit, margin, and liquidity risks associated with hedging programs.
• Explain the fundamentals of hedge accounting and its implications for financial reporting.
• Design commodity risk reports and evaluate hedging performance to support continuous improvement by the end of Day 5.

Who Should Attend

Learning Outcomes

• By the end of the course, participants will be able to:
• Explain how commodity price movements affect their organization's financial performance.
• Identify and map all significant commodity exposures.
• Quantify exposures and recognize where natural hedges already exist.
• Understand price benchmarks and manage basis risk.
• Explain how commodity derivatives markets work.
• Select appropriate hedging instruments for different exposures.
• Design practical hedging strategies aligned with risk appetite.
• Measure commodity risk using sensitivity, value at risk, and cash flow at risk.
• Establish clear hedging policies, limits, and governance.
• Manage counterparty, margin, and liquidity risks from hedging.
• Understand the basics of hedge accounting.
• Report hedging results and evaluate hedging effectiveness.

Course Outline