Question

What is price risk, shortage risk and inventory risk? I am studying the portfolio contract in supply chain management of commodity product. I think price risk is the potential of changing market price after signing the contract. Shortage risk is having not supply. Inventory risk is having too much inventory. Am I right?

Answer 1

Price Risk : Is refers to the purchasing price which is uncertain if the procurement strategy depends on spot markets..It is the probability of loss of occurring from unfavorable movement in the market price of an asset. Or we can say that it is the decrease in the value of security or an investment portfolio.

Shortage Risk: It is the situation where demand for the goods exceeds the available supply

Inventory risk: Is refereed as the inventory shortages or unsold products

Is the possibility that something like price change will cause the value of an inventory (Goods or the materials at the factories and shop) to decrease. It is also refereed as the chance that the company not able sell their goods , because of decrease in value.