Airlines Hedge On Fuel Prices. What Costs Can You Hedge? #901
Hedging is something usually associated with a commodity. Like fuel.
By hedging on fuel prices, an airline commits to buy X amount of fuel over a set period of time at a fixed price. The reason they do this is to protect them against fluctuations in the price over time.
The key attribute here in the volatility of the price over time.
With all that's changing in the way we do business in the New Normal, the same volatility we usually associate with things like oil and currencies, may start to come in to play with other supplies for your business.
Face Masks, for example, maybe be part of every business for the foreseeable future.
If there is a sudden spike in COVID-19 cases again, the price of face masks might spike too.
Perhaps you could hedge face masks?
For a Spa, if we believe there will be volatility in the price of our skin care products, due to issues with the global supply chain, maybe you could do the same. Hedge against your skin care products?
Anywhere there is significant volatility in price over time, hedging is worth considering.
#hedging #hedge #rethink