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

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  • Markou, Panos
  • Corsten, Daniel

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.

Suggested Citation

  • Markou, Panos & Corsten, Daniel, 2017. "Linking Commodity Price Risk and Operations: Evidence from the Gold Mining Industry," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 11(1-2), pages 165-185, December.
    • Handle: RePEc:now:fnttom:0200000074
    DOI: 10.1561/0200000074
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    Cited by:

    1. Jiao Wang & Lima Zhao & Arnd Huchzermeier, 2021. "Operations‐Finance Interface in Risk Management: Research Evolution and Opportunities," Production and Operations Management, Production and Operations Management Society, vol. 30(2), pages 355-389, February.
    2. Panos Markou & Daniel Corsten, 2021. "Financial and Operational Risk Management: Inventory Effects in the Gold Mining Industry," Production and Operations Management, Production and Operations Management Society, vol. 30(12), pages 4635-4655, December.

    More about this item

    Keywords

    Operational risk management; Contingency planning; Commodity price risk; Supply chain disrutpions;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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