Every hedge is a bet that two prices will move together. Basis risk is what you carry when they do not. Formally, basis is your local physical price minus the futures price you hedged with, and basis risk is the chance that this gap moves against you while your hedge is on. It is the residual risk that survives a textbook-perfect hedge, and on physical desks it is frequently bigger than the risk people spend their meetings discussing.
The uncomfortable arithmetic: a hedged position's result is not driven by the flat price at all. Sell physical, short futures against it, and your profit and loss collapses to the change in basis. Hedging does not remove risk. It swaps flat-price risk for basis risk, and that trade is only good if the basis is genuinely steadier than the price. Usually it is. When it is not, hedged books lose money in ways that confuse everyone upstream of the desk.
