Supply Chain Management Professional (SCMP) · Question
What is the purpose of 'hedging' in supply chain finance?
Hedging involves using financial instruments to protect against potential losses from adverse movements in commodity prices or exchange rates.
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Question: What is the purpose of 'hedging' in supply chain finance?
Answer options:
- To increase exposure to price fluctuations. ✅ To mitigate financial risks related to currency or commodity price volatility.
- To secure long-term financing for capital expenditures.
- To delay payment to suppliers indefinitely.
Correct answer: To mitigate financial risks related to currency or commodity price volatility.
Explanation: Hedging involves using financial instruments to protect against potential losses from adverse movements in commodity prices or exchange rates.
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