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If you are evaluating the effectiveness of your commodity risk management program, there are a couple of key questions you’ll need to answer:
How well does your strategy protect you across a range of market prices? Consider if your program is “static” or “responds” to changing market conditions.
Are you able to assess the financial implications of your strategy as it relates to key financial objectives: revenues, cash flow, hedge losses, and credit stress?
Is your program directive or restrictive—consider whether your program directs action be taken under defined market conditions, or rather your program just restricts the permissible activities?
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