“Maximize returns, minimize risk.” That mantra makesfinancial risk management sound simple. But if managing commodityexposures, for instance, were easy, every company would eliminatethe uncertainty around its spending on key inputs withoutdecreasing profits.

Obviously, it's not simple at all. In fact, the challengesinherent in commodity risk management are reminiscent of obstaclespeople face when they're trying to lose weight. We're told, “Eatless and exercise more,” but that's not as easy as it soundseither—which explains why we're not all in superb shape. Bothfitness and risk management require discipline and structure to getresults.

Every treasury professional should understand how to build asuccessful strategy for reducing the impact of commodity priceswings on the company's financial statements. Crafting a commodityrisk management program requires thoughtful consideration ofseveral key aspects of the process: getting started; setting goalswithin a written plan; changing a few things at a time, instead ofeverything at once; and developing routines that are congruent withthe goals. Breaking a company's vision of commodity risk managementinto well-defined, and well-managed, pieces may not be as excitingas a TV weight-loss show, but it has a much higher chance ofsuccess over the long term.