hedging: the essence and challenges of enterprise price stabilization

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professor pan zhibin’s analysis:
pan zhibin believes that hedging is a dynamic systematic project that requires companies to pay attention to four aspects: first, it is necessary to have a professional and stable team, equipped with a good office environment, and to coordinate and cooperate with various departments; second, a complete information system is crucial for hedging information collation, operation and performance tracking; third, since bulk raw material trading is a 24-hour global market, timely and dynamic risk control tracking is required; fourth, the prices of bulk raw materials fluctuate greatly, and a corresponding emergency decision-making mechanism also needs to be established.

interpreting hedging from different roles’ perspectives:

1. from the perspective of business operators:
business operators must think strategically about how to use hedging strategies to reduce risks and ultimately achieve profit goals. they need to formulate reasonable hedging ratios based on their own business conditions and market environment, and continue to track relevant policy changes. professor pan zhibin emphasized the importance of "no speculation" and suggested that companies strictly follow hedging systems and strategies to avoid getting into trouble due to sudden fluctuations.

2. the perspective of regulatory authorities:
the regulatory authorities play an important role in the approval and risk management of hedging business. by formulating sound policies and regulations and conducting regular regulatory inspections, they ensure that enterprises comply with rules and regulations when conducting hedging business and effectively control market risks.

3. from the perspective of professional investment consultants:
the role of professional investment consultants is to provide professional advice and guidance to help companies develop reasonable hedging strategies. based on the company's business objectives and market risk conditions, they need to conduct detailed risk analysis, stress testing, and give professional advice.

4. market experts’ perspective:
market experts focus on market trends and fluctuations. they need to continuously observe market changes, predict future trends, and provide companies with accurate investment advice and operating strategies.

challenges of hedging:

• policy changes: adjustments to national policies will have a significant impact on hedging business. enterprises need to pay close attention to changes in relevant policies and regulations and make adjustments based on actual conditions.
• large price fluctuations: the market for bulk raw materials fluctuates frequently, leading to greater market risks. enterprises need to establish a sound risk control mechanism and take timely measures to respond to market changes.
• insufficient liquidity: hedging involves multi-party transactions, and insufficient liquidity may increase transaction difficulties and affect business efficiency.
• improper operation: even professionals will encounter various difficulties and challenges during the operation process and need to continue learning and accumulating experience to improve their operational capabilities.

summarize:hedging is a complex and dynamic system engineering. enterprises need to continuously learn, explore and practice to achieve success. at the same time, regulatory authorities, professional consultants and market experts are playing their respective roles to jointly promote the healthy development of hedging.