Managing commodity risk

Commodity risk management can help your business manage risks associated with fluctuating prices. 

What it means

Fluctuations in commodity prices can make it difficult to plan and budget for your business. Commodity risk management can help your business manage risks associated with fluctuating prices. 

Our solutions help you manage the risks associated with fluctuating prices and can be customised to your specific needs. The benefits include:

  • Plan and budget with greater accuracy
  • Control costs
  • Manage margins more effectively
  • Create certainty around fluctuating commodity prices
  • Take advantage of a strategic view of commodity prices

Solutions - Swaps

Commodity swaps offers growers and consumers a fixed or floating price per unit of measurement1. This is how it works: 

  • Swaps can be used to lock in a fixed price per unit of measurement
  • Swaps can have multiple settlement dates or one settlement date known as ‘rate-set’ periods, where a cash settlement will take place between your business and CommBank
  • These rate-set dates may be quarterly, semi-annually or customised to your needs
  • Swaps are cash settled at maturity, irrespective of whether CommBank owes you a cash payment or whether you owe the bank a cash payment. Physical commodities cannot be delivered to discharge a swap obligation.

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Foreign Exchange Risk

Foreign exchange risk management can help your business manage risks associated with currency fluctuations.

What it means

Foreign exchange risk arises due to fluctuations in exchange rates. If you have a need to exchange currencies you may be impacted by currency risk. The features to managing that risk are two-fold.

  • Primary goal is to protect your business from the adverse impact of exchange rate fluctuations
  • Because foreign exchange rate volatility may provide opportunity it is important to strike a balance between potential risk and return.

Solutions for managing foreign currency risk

Forward foreign exchange

  • A risk management tool that can help protect your business from adverse exchange rate movements
  • You agree an exchange rate now for a specific time in the future, which enables you to plan and budget with more certainty. 

Flexible forwards

These provide protection against adverse exchange rate movements while giving you the opportunity to benefit from favourable exchange rate movements.

Currency options

These provide the buyer of the option with the right (but not the obligation) to buy or sell one currency amount at a specified exchange rate on a specified date. A premium is payable.

Foreign exchange tailored solutions

You can speak with our Global Market specialist to discuss a tailored solution to meet your needs.

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Managing interest rate risk

CommBank offers a range of flexible tools to help manage your interest rate risk and cash flows relating to your borrowing facilities.

What you get

Managing interest rate risk can provide both protection and opportunity. Having protection against nominated worst-case scenarios and adverse interest rate movements can save you money and give more certainty for management and budgetary purposes.

You can also structure your risk management for the potential to benefit from favourable rate movements so you lower costs and ultimately increase profits. Our specialists provide advice on a range of risk management tools including:

  • Fixed rate bills
  • Flexi Bill Solutions
  • Swaps
  • Options
  • Forward rate agreements

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Things you should know

1 There could, however, be a mismatch between the fixed price per unit of measurement and the commodity price on the settlement date, and as a result, you might not cover all of your price risk.

This also means that while you have certainty through the fixed price per unit of measurement on each settlement date, you will not be able to take advantage of favourable changes to commodity prices.

As this advice has been prepared without considering your objectives, financial situation or needs, you should, before acting on the advice, consider its appropriateness to your circumstances. All products mentioned on this web page are issued by the Commonwealth Bank of Australia, view our Financial Services Guide (PDF). Applications for finance are subject to credit approval. Full terms and conditions are available in loan offer. Fees and charges apply.

The target market for this product will be found within the product’s Target Market Determination.

Please refer to the new CommBiz International Payment and Foreign Exchange Product Disclosure Statement.