Unlock Value with a Differentiated Approach

摘要

Our industry must depart from the conventional risk approach and include participants throughout the cotton supply chain who impact counterparty performance. The focus should be to develop risk management solutions that apply across the textile valuechain to achieve better control. For discussion purposes, participants in that chain are referred to as "Industry Risk Takers" (IRT) and include all parties who enter into a contract to take ownership of cotton, or cotton textile products, over a periodof time, thus exposing them to price. Over the past several years, with all of the price shocks rippling through the cotton market, merchants frequently looked to the commodity futures markets for price risk management tools — only to find that unexpected counterparty risk can far outweigh other tactical measures. Historically, risk management in the cotton industry has focused on actions between growers and merchants, with limited risk management by spinners (see chart). 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.