The contract is fixed for twelve months. Your inputs re-price every thirty days.

Fixed prices with floating input costs is an unhedged position, and most businesses carrying it have never sized how large it is.

By Steve 5 min read
Abstract bridge artwork for The contract is fixed for twelve months. Your inputs re-price every thirty days.

A twelve-month supply agreement, a fixed schedule of rates, a quote honoured six months after it was issued. Each of these is a commitment to sell at a known price. None of them comes with a matching commitment from your suppliers to hold their prices for the same period. The gap between the two is a real economic position, and it is nearly always taken accidentally. This is not a story about inflation. Inflation is the weather. The structural issue is duration mismatch: the length of time your selling price…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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