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Financial and Operational Risk Management: Inventory Effects in the Gold Mining Industry

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dc.contributor.authorMarkou, Panos
dc.contributor.authorCorsten, Daniel
dc.contributor.rorhttps://ror.org/02jjdwm75
dc.date.accessioned2024-07-02T16:11:29Z
dc.date.available2024-07-02T16:11:29Z
dc.date.issued2021-05-01
dc.date.issued2021-12-01
dc.description.abstractFinancial and operational risk management are central concepts at the intersection of finance, operations, and commodity risk management. Yet, empirical evidence on their effects on inventory is lacking. We use a fine-grained data set comprising the financial and operational risk management decisions of gold miners from 2003 to 2011 to empirically assess the effects of risk management on inventory. Faced with volatile gold prices, miners may manage (output) risk financially by committing to sell future gold production and lock in prices. They may also manage (input) costs operationally by varying the quality of ore they extract and process, thereby altering the costs they incur and influencing inventory holdings. In addition to affecting profitability, we show that these two risk management strategies have implications for inventory holdings. We find that a one-standard deviation increase in financial risk management (FRM) is associated with an 14.3% decrease in inventory, as FRM decreases the option value of delaying processing inventory. On the other hand, a one-standard deviation increase in operational risk management (ORM) is associated with a 3.5% increase in inventory. We also find evidence that, in this context, FRM and ORM could be viewed as complements.
dc.description.peerreviewedyes
dc.description.statusPublished
dc.formatapplication/pdf
dc.identifier.citationMarkou, P., & Corsten, D. (2021). Financial and operational risk management: Inventory effects in the gold mining industry. Production and Operations Management, 30(12), 4635-4655. https://doi.org/10.1111/poms.13448
dc.identifier.doihttps://doi.org/10.1111/poms.13448
dc.identifier.issn1937-5956
dc.identifier.urihttps://hdl.handle.net/20.500.14417/2889
dc.issue.number12
dc.journal.titleProduction and Operations Management
dc.language.isoen
dc.page.final4655
dc.page.initial4635
dc.page.total4635-4655
dc.publisherWiley
dc.relation.entityIE University
dc.rightsAttribution Non-Commercial No-Derivatives 4,0 International
dc.rights.accessRightsinfo:eu-repo/semantics/openAccess
dc.rights.urihttps://creativecommons.org/licenses/by-nc-nd/4.0/
dc.subject.keywordFinancial risk management
dc.subject.keywordOperational risk management
dc.subject.keywordGold mining
dc.subject.keywordEmpirical
dc.subject.keywordInventory
dc.subject.otherFinancial risk management;Operational risk management;Gold mining;Empirical;Inventory
dc.titleFinancial and Operational Risk Management: Inventory Effects in the Gold Mining Industry
dc.typeinfo:eu-repo/semantics/article
dc.version.typeinfo:eu-repo/semantics/publishedVersion
dc.volume.number30
dspace.entity.typePublication
relation.isAuthorOfPublication12d316b7-c7f0-45df-97a3-ab72c009dbc5
relation.isAuthorOfPublication12d316b7-c7f0-45df-97a3-ab72c009dbc5
relation.isAuthorOfPublication.latestForDiscovery12d316b7-c7f0-45df-97a3-ab72c009dbc5
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