The Impact Of Risk-Taking Attitude, Confidence And Numeracy On Commodity Purchasing Decisions

Abstract

Hedging decisions in commodity purchasing involve strategies to lock in commodity prices or quantities in advance, protecting against price fluctuations and reducing the risk of financial losses. This research examines the impact of a supply manager’s risk-taking attitude, numeracy skills, and confidence on their commodity hedging decisions. We employ a Discrete Choice Experiment to test four hypotheses grounded in existing literature. The experiment was designed through extensive consultations with industry practitioners and refined through a pilot study. Using data collected from 136 sourcing managers in the fast-moving consumer goods (FMCG) industry, we find that the risk preferences of a supply manager are significantly shaped by a combination of risk-taking attitude, numeracy skills, and confidence. High tendency toward risk-taking and high confidence correlated with a preference for riskier choices, while the direct relationship between numeracy skills and risk preference was negative but weaker, primarily moderated by risk-taking attitude and confidence levels. These results deepen our understanding of behavioral supply management by clarifying how specific behavioral traits impact hedging decisions in commodity purchasing, while providing practical insights for practitioners to improve decision-making in fluctuating market environments.