Hofmann, ErikErikHofmann2023-04-132023-04-132011-03https://www.alexandria.unisg.ch/handle/20.500.14171/9444510.1108/13598541111115374Purpose - Supply chain risks significantly endanger small and medium-sized enterprise (SME-) suppliers in different currency areas in purchasing and sales. The purpose of this paper is twofold: to describe the concept of natural hedging in supply chains, and to highlight the potentials of natural hedging as a risk prophylaxis and a supplier financing approach. Design/methodology/approach - The paper uses a brief literature review and a conceptual research design, taking the financial and physical component of natural hedging (in this case between an OEM and its SME-suppliers in the automotive industry) into consideration. Findings - Natural hedging of currency and commodity price fluctuations can contribute to the reduction of SME-suppliers' supply chain vulnerability, also benefitting an OEM. Research limitations/implications - This research focuses exclusively on relationships between SME-suppliers and large OEMs in the automotive industry. Studies of other types of companies and industries, such as the capital goods industry, might reveal divergent practices. Practical implications - With the natural hedging approach, the paper promotes an innovative concept for better managing risks in supply chains, especially in recessionary times. The concept is a source for supplier financing. Originality/value - This research shows that a globally active focal firm - an OEM in the automotive industry, for instance - can hedge currency and commodity price risks (financial components), as well as operational supply risks (physical components), by centralizing commodity supply with its SME-suppliers. It can serve as a base for future research.enAutomotive industrySupply chain managementRisk managementSmall-to medium-sized enterprisesFinancial performanceCollaboration.journal article