Natural hedge

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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