Matallgesellschafts Hedging Debacle Case Study Example | Topics and Well Written Essays - 750 words

Matallgesellschafts Hedging Debacle - Case Study ExampleThis sermon highlights that the action taken by the board was a clear sign of panic from their side the board replaced MGs top management and liquidating the hards derivative position and forward supply contracts. These actions clearly portray a board on panic since it did not take time to view other options available. It was not the fault of the top management that anoint prices fell thus sacking them would not change a thing. The new top managers decreed did nothing to reverse the situation instead, they declared the speculative oil prices as the cause of the huge disadvantagees incurred by the firm. The case ends with an end to the firms involvement in the oil market but not a solution that would improve the firms position in the oil market.This need discusses that there is a high possibility that the firms board did not understand the full implication of the hedging dodge. The strategy was to hedge against encourageme nt in prices of oil products in the market. Incase prices went up the firm stood a chance of making a good profit. However, loss was an inevitable part of the strategy that was not considered early in advance. If the board understood the whole hedging strategy, it would have reconsidered before ending the firms involvement in the oil market. Possibly, it would have found ways to minimize losses as they await oil prices to pick in future to enable the firm recover the loss and possibly make profits.