Annual Preview: A Differentiated Approach to Risk for Unlocking Value

Our cotton Industry must redefine itself from the conventional risk approach to include participants through the supply-chain that impacts the counterparty performance. The focus should be to develop risk management solutions that can be applied across the textile value chain to achieve better control. Actually, a more appropriate term is “Industry Risk Takers” (IRT). This includes all parties who enter into a contract to take ownership of cotton and/or cotton textile products over a period of time, exposing them to price.

With price shocks rippling through the cotton market in recent times, cotton merchants looked to the commodity futures markets for price risk management tools only to find that unexpected counter party risk can far outweigh other tactical measures. Historically, the risk management in the cotton industry has focused on actions between growers and merchants with limited risk management by spinners. It is now time for us as leaders to lead the IRT from the middle of the pack directing our attention to contractual agreements down the supply-chain.

You can read the rest of this article and dozens of others when the 2012 Cotton International Annual Edition is published. Be sure to watch for it in your mailbox in January 2012!