Ski resorts can hedge harmful scenarios for snow production through parametric weather-linked financial products
Weather derivatives enable ski resorts to hedge weather conditions (temperature/humidity/wind) that prevent from producing artificial snow as well as the lack of snowfall. Cash flow smoothing throughout seasons is benefitial for this industry which is consistently exposed to weather risk.
For any shareholder who is not diversifiying weather risk from their portfolio, a weather risk management strategy is absolutely essential.
Medicines consumption shows consitent correlation with weather variability. Financial weather risk management techniques enable CFOs in the Pharma industry to stabilize cash flows neutralizing the effect of weather in sales. The result is the reduction of the company WACC (weighted average cost of capital) thanks to the risk minimization.
A recent study from two U.S. universities, Notre Dame and Stanford University, shows that actively hedging weather risk can lead to an increase in firm value.
Fiscal consolidation is on the agenda of nearly all governments throughout the world. However, extreme weather conditions such as unexpected snow, fire or flooding- exert tremendous impact on the public accounts. Thus, governments are advised to hedge extreme weather risk to ensure fiscal consolidation.