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

Matallgesellschafts Hedging Debacle - Case Study ExampleThis discussion highlights that the attain taken by the board was a clear sign of panic from their side the board replaced MGs top management and liquidating the firms derivative position and forward supply contracts. These actions intelligibly portray a board on panic since it did not take time to reconsider otherwise options available. It was not the fault of the top management that rock oil prices fell thus sacking them would not remove a thing. The new top managers appointed did nothing to reverse the situation instead, they declared the speculative oil prices as the cause of the huge losses incurred by the firm. The case ends with an end to the firms conflict in the oil market but not a solution that would improve the firms position in the oil market.This study discusses that there is a high possibility that the firms board did not understand the full implication of the hedging strategy. The strategy was to hedge again st rise in prices of oil products in the market. Incase prices went up the firm stood a chance of making a sizable profit. However, loss was an inevitable part of the strategy that was not considered early in advance. If the board understood the tout ensemble hedging strategy, it would comport 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 tense to enable the firm recover the loss and possibly make profits.