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# What the Winter Olympics can teach about commodity price risks

The 2014 Winter Olympics are over and recently there was a chat with a German Paralympics skier who won multiple gold medals.

She had one of the medals with her and when the medal was passed around to the other participants around the table one of the remarks was that the medal is quite heavy. Looking at the size of the medal it was quite obviousthat it was not pure gold – so this caught my attention and made me look up what gold medals are made of.

So here the findings:

Olympic gold medals that were given out in Sochi include 6g Gold and 525g
Sterling Silver for the Olympic Games and 6g Gold and 680g Sterling Silver for
the Paralympic games.

The next question another article
is looking at is the actual value of the raw material included. The article
states that the value of the 2014 medal was around
\$550.

When looking at the prices for gold and silver during the
period of the Olympic and Paralympic games (07.02.2014 – 16.03.2014) we see how
difficult it is to make a statement about the value.

The price for gold during this period fluctuated between
1260,00\$ and 1370,00\$ per troy ounce. Silver between 19,87\$ and 22,05\$ per
troy ounce (source:
http://lbma.org.uk/pages/index.cfm).

The raw material value per medal during this short period fluctuated between 578,45\$ and 629,33\$

for the Olympic medals and between 677,47\$ and 739,21\$ for the Paralympic medals.

The lowest price for the medals during the period of the games was on 07.02.2014 while the
highest price was on 24.02.2014.

For the athletes the raw material values won’t mean much as the personal value

of such a medal is much more important but thinking about the companies that manufacture such medals

these fluctuations have a significant effect on their margin. Planning for an event
like the Olympic and Paralympic games happens significantly before the event
and this applies to all large scale projects. If we assume that to manufacture all
the medals takes a few months, one can imagine how high the price risk was
during manufacturing because  the value
fluctuated in a 9% range during February 2014.

If you want to get more information on how SAP’s software can help to quantify and manage commodity
price risks and manage commodity within SAP then you should have a look at our
SAP Commodity Management Solutions. If you are interested just send me an email
or ask your SAP contact about more information.

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