Case Detail

Case Summary

Measuring and Managing Risk in Commodities: Corn and the Golden Kernel

Case Number: 5-317-502, Year Published: 2018

HBS Number: KE1072

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Key Concepts

Commodity, Decision Making, Financial Instruments, Financial Planning, Financial Strategy, Hedging, Risk Management, Statistical Methods, Strategic Planning

Abstract

Risk managers have more tools than ever to help protect their companies from risk. Complex financial instruments, intricate mathematical models, and access to massive amounts of data can help the risk manager structure a multifaceted strategy to decrease volatility and protect the company from a catastrophic event. However, these tools have their own risks that can complicate a risk manager's job.

Analyzing corn price volatility helps students understand four best practices for risk managers, regardless of the specific risks they face or the strategies they employ: quantify the company's exposure; understand the nature of the risk; understand how the hedge works in practice; and separate hedging and speculation.

Learning Objectives

After reading and analyzing the case, students will be able to apply knowledge of market forces such as supply and demand; analyze basic statistical relationships between risk-related variables; and develop statistical tools for risk management that predict market outcomes.

Number of Pages: 19

Extended Case Information

Teaching Areas: Finance

Teaching Note Available: Yes

Geographic: United States

Industry: Agriculture, Energy, Ethanol, Biofuel, Oil, Natural Gas