Commodity Price Volatility Mitigation in Supply Chain Risk Management: Real Options to Assess the Value of Flexibility-driven Strategies

Commodity Price Volatility (CPV) management is becoming extremely important both from an academic and a practitioner perspective, even if from the screening of the literature it turns out that there are few works focusing on how to manage CPV. Such works are limited to either outlining an approach to assess a company's risk exposure or identifying and simply describing the most common CPV mitigation strategies. In fact, these strategies are not assessed and benchmarked. The aim of this study is to accomplish this objective, focusing on two of the most common non-financial and supply chain-driven CPV mitigation strategies. The main contribution of the present research is the development of a model that is easy to implement and that will support companies to (i) assess and manage their CPV and its inherent risk on their profitability and (ii) select the proper mitigation strategy, on a commodity-by-commodity base.