LONDON--(BUSINESS WIRE)--SpendEdge, a leading provider of procurement market intelligence solutions, has announced the completion of their latest article on risk management strategies to address price volatility in the US oil and gas industry. The article identifies key strategies that can be adopted by firms to mitigate the risk of price volatility in the oil and gas industry.
Despite accounting for the majority of the world's energy generation, the US oil and gas industry is the industry with the highest risk factor. Companies have to address fluctuating oil prices and ever-changing government regulations. Not only this, the government's trade war sometimes becomes a major challenge for companies, thereby increasing price volatility. Therefore, it becomes vital for companies in the US oil and gas industry to analyze strategies that can ensure financial stability and protect investors within the sector.
According to the experts at SpendEdge, “Risk mitigation strategies can help businesses to mitigate the risk of price volatility and improve the risk management process in the capital intensive oil and gas industry.”
Implementing effective risk management strategies is crucial for companies in the oil and gas industry to address uncertainties at different levels. Request free platform access to leverage our smart procurement solutions now!
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Key Risk Management Strategies for Mitigating the Risk of Price Volatility
Create forward contracts
Creating forward contracts is one of the best strategies that companies in the oil and gas industry can follow to address price volatility. It is a private agreement signed between a buyer and a seller, obligating the buyer and the seller to purchase and sell oil at a set price which is equal to the forward price set at the start of the contract. This reduces the risk of default on any single party.
Develop future contracts
Future contracts are traded in exchanges. In this, a clearing house represents the buyer and seller. The main idea behind developing future contracts is to ensure the quality and quantity of the products delivered by mitigating the risk of default. Such contracts are given much importance in the US oil and gas industry.
Getting the best possible terms during every purchase is crucial to mitigate the risk of price volatility. Request for a complimentary proposal to gain access to our complete portfolio of contract management solutions for FREE.
Introduce the concept of swap
Oil swaps are used as a hedging instrument for risk mitigation in the US oil and gas industry. It allows the exchange of financial assets between concerned parties at a predetermined rate. Since its usually arranged through a financial institution, the risk of price volatility is transferred from oil producer to the lender. Swaps also guarantee a firm price for a calculated volume of crude oil for oil producers.
To know in detail about the strategies mentioned, contact our support team now!
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