Managing commodity risk

Offers your business protection from the negative impact of fluctuating prices at the lowest possible cost. It helps you manage the risks associated with fluctuating prices.

What it means

Fluctuations in commodity prices and currency movements can make it difficult to plan and budget for your business. Commodity risk management offers your business protection from the negative impact of fluctuating prices.

Our solutions help you manage the risks associated with fluctuating prices. 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
  • Customise solutions developed for specific needs
  • Hedging via swaps removes the possibility of margin calls and brokerage associated with using futures

Solutions - Swaps

Commodity swaps offer growers and consumers a fixed or floating price per unit of measurement that covers the majority of their price risk, excluding basis risk. 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 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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Managing currency risk

Currency risk management will help protect your business from the negative impact of currency fluctuations while benefitting from favourable exchange rate movements.

What it means

  • Currency risk arises because the value of the Australian dollar fluctuates due to supply and demand. Any business that purchases stock or equipment overseas or exports its products abroad is affected.  The benefits of managing that risk are two-fold:
  • Primary goal is to protect your business from the negative impact of exchange rate fluctuations
  • Because exchange rate volatility also provides opportunity for gains, a secondary goal is to strike a balance between potential risk and return

Solutions for managing currency risk

Forward foreign exchange

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

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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

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.