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Glossary definition: Financial Risk Management

Financial Risk Management: Strategies & Risk Mitigation

Financial risk management is the practice of creating and protecting value by managing exposure to risk. It involves the identification, assessment, and prioritization of risks, followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events. Financial risk management is a process that involves the use of financial instruments, such as derivatives, securities, and other financial instruments, to hedge or mitigate the financial risks associated with investments, business activities, and other financial transactions. Financial risk management is also used to identify, quantify, measure, and manage the risks associated with financial transactions and investments. Financial risk management helps to ensure that businesses and investors are able to maximize returns on their investments while minimizing their exposure to risk. This is accomplished by using various techniques, such as hedging, diversification, insurance, and portfolio management.