Published: 02-Apr- 2007 | Comments: 0
The volatility in the price of both raw materials and finished goods has long had a highly disruptive effect on the forest products industry. Risk Fusion™ packages many uncorrelated risks together to take advantage of the natural portfolio effect. Uncorrelated risks tend to offset each other to some degree. By packaging traditionally insurable risks with financial risks such as currency, interest rate, and various commodity price risks, we can create a portfolio whose overall volatility is less than that of its parts and, therefore, more economical to insure. While this may not cancel out all the volatility a company faces, it can provide some element of control on a more economical basis than the traditional practice of treating each risk on its own.