Linking Commodity Price Risk and Operations: Evidence from the Gold Mining Industry

Panos Markou and Daniel Corsten

Foundations and Trends(R) in Technology, Information and Operations Management, 2017, vol. 11, issue 1-2, 165-185

Abstract: Analytical research has suggested a link between financial and operational risk management and its impact on operational outcomes. In this chapter, we use the gold mining industry as an empirical context to explore the effects of risk management on inventory. Gold miners manage risk 1) financially by committing to sell gold through forward contracts and sold call options and 2) operationally by varying the grade of gold they process. We find that gold commitments and variable grading have clear effects on gold inventory, and that they could be viewed as complementary risk management strategies.

Keywords: Operational risk management; Contingency planning; Commodity price risk; Supply chain disrutpions (search for similar items in EconPapers)
JEL-codes: G20 G32 M11 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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