Natural hedge

Treasury - risk management - hedging.

In risk management, a natural hedge is a pre-existing or strategic item that offsets another item in a portfolio.

Natural hedges are contrasted with external hedging instruments and techniques, such as derivative financial instruments.

Risk management using natural hedges can include identifying natural offsets that already exist, as well as creating new offsetting positions.

Inactivity has consequences

"... remember that - when it comes to hedging - not doing anything is a decision in its own right.

Of course, at times, not using hedging instruments (derivatives) might be the best scenario for the business - especially if there are natural hedges to exploit internally.

But be conscious in your approach to risk management, and remember that inactivity - or the lack of decision-making around hedging - is in fact an action with consequences."

Eleanor Hill, Founder, The Treasury Storyteller.

See also

• Carry trade
• Corporate treasury
• Derivative instrument
• Downside risk
• Enterprise risk management
• Guide to risk management
• Hedging
• Macro hedging
• Portfolio
• Resilience
• Risk
• Risk analysis
• Risk appetite
• Risk assessment
• Risk averse
• Risk evaluation
• Risk identification
• Risk management
• Risk management framework
• Risk management policy
• Risk premium
• Risk register
• Risk reporting
• Risk response
• Risk tolerance
• Sustainability
• Systemic risk
• Tail risk
• Transferable risk
• Treasury