| The term "risk" describes the probability of an | | | | very similar to general risk management with a |
| undesirable event happening as a result of a present | | | | specialization in a business's finances. Like general risk |
| decision or of some future event. In life, we face | | | | management, financial risk management also follows |
| multitudes of these risks. There are risks that we | | | | the processes of risk identification, analysis, |
| would readily take while there are also those that we | | | | evaluation, and treatment. Financial risk management, |
| would try to avoid. There are risks that we consider | | | | however, is more focused on finances and makes |
| worth taking and those that we would not consider | | | | use of financial instruments to manage a business's |
| because they are surely headed for a loss. | | | | exposure to risks. |
| The worlds of business and finance are not much | | | | Instead of leaving businessmen with a variety of |
| different from our lives when it comes to risk-taking. | | | | choices for risk treatment, financial risk marketing is |
| In any business venture, owners or shareholders are | | | | focused primarily on hedging, which is the use of two |
| bound to face risks. Like the risks we face in | | | | counter-balancing investment strategies to offset the |
| everyday life, some of these business risks can be | | | | negative effects of price fluctuations. Aside from |
| easily handled and some cannot, and the process of | | | | these differences, everything else is essentially the |
| deciding which is which belongs to the practice of risk | | | | same. |
| management. | | | | Risks are inherent in any business venture, and when |
| Risk management refers to the entire process of | | | | it comes to financial risks, businessmen don't have |
| identifying, analyzing, evaluating, and treating risks. | | | | much choice but to face them. It is for this reason |
| But since businesses are faced with many different | | | | that knowledge about financial risk management is |
| types of risks, risk management specializations have | | | | very important in the business world. The practice |
| also been created to deal with them. One | | | | won't help businessmen avoid risks, but it gives them |
| specialization of risk management is enterprise risk | | | | a chance to counterbalance the negative effects of |
| management, which deals with non-financial risks. | | | | risks whenever they have to take one. |
| And then there's financial risk management, which is | | | | |