| With the rapid development of domestic futures market,more and more enterprises designate commodity futures contracts as the hedging tool to avoid the risk of commodity prices in the spot operation.Nevertheless,as a double-edged sword,hedging is very likely to trigger fluctuations in corporate profits due to operators’ lack of theoretical and practical experiences,even if it enables the corporations to better avoid risks.Therefore,how to set up the internal control of hedging business and establish effective hedging risk management system should become a serious concern.In this paper,the commodity futures hedging internal control framework,together with relevant procedures,will be depicted at the very beginning.Then,Z Smelting Plant is picked out as a typical example to illustrate how hedging is utilized in practice.With interviews and researches conducted,we process the hedging occurred in the Z Smelting Plant,through which risks and solutions will be demonstrated thereafter.At present,the issues include the existence of speculative hedging,no hedge fund budget,no internal audit function,business department and functional department’s lack of communication.In order to solve these problems,I suggest that Z Smelting Plant should correctly understand the objectives and risks of hedging,set up the hedge fund budget as soon as possible and construct the hedging internal audit function,business departments and functional departments of communication.The contribution of this paper lies in the combination of theories and practice.Given that few domestic case studies on the internal control of commodity futures hedging have been conducted in recent years,most of which focus on theoretical level such as the risk and risk management framework,how to combine the framework with practice has become a more heated problem.In this paper,the instance of Z Smelting Plant is expected to well illustrate the procedures,issues and suggestions about futures hedging.Hopefully,this paper is capable of providing case resources for China’s commodity futures hedging internal research. |
