Quick answer: Risk assessment identifies and quantifies a firm's commodity exposures — how much volume is at risk, to which prices, over what timeframe, and with what basis. It is the foundation on which every sound hedging decision is built.

What does risk assessment involve?

It maps exposures by volume, price, location (basis), and timing, giving the clear picture that commodity hedging advisory needs before acting.

Why is it the foundation?

Without knowing the size and shape of exposure, firms cannot choose the right strategies or instruments. Assessment also draws on market analysis.

How do advisors conduct it?

Advisors quantify exposure and prioritize what to hedge based on materiality and objectives. Mobius Risk Group's commodity risk management advisory begins with rigorous risk assessment.

Frequently asked questions

What is risk assessment in hedging?

Identifying and quantifying commodity exposures — volume, price, basis, and timing — before deciding how to hedge.

Why do it before hedging?

Because the right instrument and amount depend on the size and shape of the exposure.

What is basis risk?

The risk that the hedge's reference price differs from the firm's actual local price.