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HomeHomework HelpfinanceFinancial Risk Management

Financial Risk Management

Financial risk management involves identifying, assessing, and prioritizing financial risks followed by coordinated efforts to minimize, monitor, and control the probability and impact of unforeseen financial events.

intermediate
5 hours
Finance
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Overview

Financial Risk Management is essential for organizations to navigate the uncertainties of the financial landscape. By identifying and assessing various types of risks, businesses can implement strategies to mitigate potential losses. This proactive approach not only protects assets but also enhances...

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Key Terms

Market Risk
The risk of losses in financial markets due to adverse price movements.

Example: Stock prices falling due to economic downturns.

Credit Risk
The risk of loss due to a borrower's failure to repay a loan.

Example: A company defaulting on its bond payments.

Operational Risk
The risk of loss from inadequate or failed internal processes, people, and systems.

Example: A data breach affecting customer information.

Hedging
A strategy used to offset potential losses in investments.

Example: Using options to protect against stock price declines.

Diversification
Spreading investments across various assets to reduce risk.

Example: Investing in stocks, bonds, and real estate.

Risk Matrix
A tool used to evaluate the severity and likelihood of risks.

Example: A grid showing risks categorized by impact and probability.

Related Topics

Investment Analysis
Study of how to analyze and evaluate investment opportunities.
intermediate
Portfolio Management
The art of managing a collection of investments to achieve specific financial goals.
intermediate
Derivatives Trading
Understanding financial instruments whose value is derived from other assets.
advanced

Key Concepts

Risk IdentificationRisk AssessmentRisk MitigationRisk Monitoring