Firms can choose from an array of approaches for reducing financial losses caused by commodity price changes in purchasing process. This paper provides procurement managers with guidance for more accurately estimating the financial effects of mitigating commodity price risk volatility. Based upon two prominent methodologies, namely Total Cost of Ownership (TCO) and Real Options Valuation (ROV), this paper illustrates how commodity price risk mitigation strategies can be analyzed with respect to their effect on costs and performance. A case study allowed to practically simulating how TCO and ROV can provide useful insight in estimating the costs, risks and benefits related to the use of commodity price volatility mitigation approaches, as well as the benefits and drawback of each cost estimation method
Estimating the Financial Effects of Mitigating Commodity Price Volatility
Gaudenzi, B.;Zsidisin, G. A.
2019-01-01
Abstract
Firms can choose from an array of approaches for reducing financial losses caused by commodity price changes in purchasing process. This paper provides procurement managers with guidance for more accurately estimating the financial effects of mitigating commodity price risk volatility. Based upon two prominent methodologies, namely Total Cost of Ownership (TCO) and Real Options Valuation (ROV), this paper illustrates how commodity price risk mitigation strategies can be analyzed with respect to their effect on costs and performance. A case study allowed to practically simulating how TCO and ROV can provide useful insight in estimating the costs, risks and benefits related to the use of commodity price volatility mitigation approaches, as well as the benefits and drawback of each cost estimation method
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
