Which exposure should a company actually hedge?

Begin with the economic variable that can impair margins or liquidity. Separate volume, timing and price exposure from accounting changes that do not alter operating cash flows in the same way.

Map physical obligations against financial contracts. Test basis risk, correlation, delivery horizon, collateral demands and the cost of protection. A hedge can be directionally right and operationally wrong if it consumes cash at the wrong time.

Determine which risk should remain intentionally open. A framework cannot select an instrument or amount for a company without the mandate, current facts and appropriate professional review.