Which of the following is the most appropriate risk management technique to protect the organization against these price fluctuations?

An organization buys crude oil on the open market and refines it into a high-quality gasoline. The price of crude oil is extremely volatile.

Which of the following is the most appropriate risk management technique to protect the organization against these price fluctuations?
A . Enter into long-term gasoline purchase agreements with end customers.
B. Trade crude oil derivatives at financial markets in order to benefit from price fluctuations
C. Purchase crude oil-related derivatives such as futures or options
D. Stock as much raw materials as possible and consider Investing into additional facilities

View Answer

Answer: A