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The Mars cocoa fraud and why operational risk — not price risk — can sink companies. Price risk often grabs the headlines when commodity prices go through periods of high volatility. But it's operational risk that often causes losses or worst-case, bankruptcy, at companies. Think Barings Bank - the 233 year old financial institution that was sunk by poor derivative dealing controls. The sentencing of the former head of Mars cocoa price risk last year for fraud is another star

What is a Target Redemption Forward (TARF)? The hidden risks of this exotic FX option. If Lewis Carroll had been a risk manager he might have written: “Beware the TARF my son The vol that bites, the losses that snatch Exotic options are no fun When you learn there’s always a catch” TARFs (or Target Redemption Forwards) are complex foreign currency derivatives (a form of exotic option). In essence they provide enhanced protection against adverse currency moves but terminate if

How Pandora is hedging gold and silver out of its business — A commodity risk strategy case study. Fifteen percent. That's how much Pandora's stock has jumped after Q1 results landed this week. That's somewhat unexpected given the Q1 result headlines: - revenue down 3.3% - like-for-like sales flat, - EBIT margin compressed 140bps - North American like-for-like sales down 2% So why the rally? Because the earnings call revealed one of the more interesting commodity strategi

Why Procter & Gamble doesn't hedge commodities — and the case for natural hedging. One billion dollars. That’s the profit hit Procter & Gamble says it could face in FY27 from rising oil costs. The company has a policy of not hedging commodity costs with derivatives. With such a large potential loss it seems strange then to ask "should they have hedged"? But P&G's commodity risk strategy isn't an oversight — it's an explicit choice. They prefer to use “natural hedging” - a glo

Well not ‘lost’ perhaps but finished out the money. It’s an irony of most hedging programs that we don’t want them to be effective. This can be a hard concept to explain to senior management at times. Many hedging programs do not hedge 100% of exposures but often follow a so-called ‘declining wedge’. In this case a portion of exposures remains unhedged. Consider a copper purchaser that needs to buy 100 tonnes of copper every month and who has hedged 50% per month at $10k / to

Cocoa price volatility in 2026: What will the impact on the price of chocolate be? “The prices of Easter eggs are out of control. Time to tell the kids the Easter bunny has died.” So went a quote in an Australian news article in late February 2026 bemoaning the high price of chocolate. One confectionery vendor (best remaining nameless) maintained: “Like all chocolate makers, we are navigating significantly higher cocoa and input costs globally.” Being purveyors of commodity h