Procurement terms: H

Refer to Goods, Dangerous

Refer to Goods, Dangerous

Hedging is a deliberate strategy adopted to limit the potential for future losses. For example, airlines may hedge their exposure to rises in aviation fuel by the use of options. The airline might purchase a call option that gives the company the right - but not the obligation - to buy a quantity of fuel from the seller at an agreed price some time in the future. If the price of aviation fuel rises above the agreed price, the airline can exercise the option and buy at the agreed price rather than the spot price. Such hedges are expensive, so airlines may hedge only a proportion of their spend portfolio. Similarly, if a company makes most of its sales in a particular overseas country, then a natural hedge against currency fluctuations is to purchase materials from the same country. Whichever way the currencies move against each other, the buying company will either gain on cheaper materials, or make more profit on sales.

An agreement that holds significant importance and financial value for one or both parties involved

Refer to Contract, Hire

A hire purchase contract is an agreement to allow the use of an asset while instalment payments are made, prior to a final payment which allows title in the goods to pass to the buyer. Hire purchase may be used instead of outright purchase where the buyer wants the benefits of usage but does not want to make the initial outlay for outright acquisition. Instead, the buyer pays regular payments which act as rental payments, covering the cost of the asset, the interest accrued and the supplier’s profit. When the total sum has been paid, the buyer may then buy the asset at a nominal sum or return the asset to the supplier. See also Contract, Hire.