Business Excellence, Vol. 4 No. 2, 2010.
Review article
WEATHER RISK MANAGEMENT
Tonći Lazibat
; Faculty of Economics & Business, University of Zagreb
Ivana Županić
; Faculty of Economics & Business, University of Zagreb
Abstract
It is hard to find any business sector whose business performances are not, directly or indirectly, influenced by weather. Weather differs from other sources of risk because it affects quantity sold and not the price at which goods are being sold. And while weather
risk may be the oldest risk businesses face with, it was not until recently that an effective management solution was developed. This paper presents key weather risk specificities that have led to development of such management solution – so-called weather derivatives. Afterwards, four basic management tools are described that were available to weather sensitive businesses until the development of weather derivatives market in 1997. At the same
time, reasons why weather derivatives are superior to other weather risk management tools are explained. Weather risk management is outlined as a process and steps of the process are given. Possible flow of weather transaction is recommended and role of advisory and other ancillary services emphasized.
Keywords
weather risk; weather risk management tools; natural hedge; weather derivatives
Hrčak ID:
60701
URI
Publication date:
10.10.2010.
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