what are the steps involved in the financial risk management process?

Expert Solution

Financial risk management can be done using the following steps:

Step 1 - Risk identification: Financial risk can arise from changes in interest rates, exchange rates, market prices or commodity prices, risks entailed in financial transactions with other parties or from internal actions of the company (mainly failure of people and/or systems in place)

Step 2 - Measurement of risk: The risk is modeled so that its impact can be measured and based on the impact, decision is taken on how to deal with the risk.

Step 3 - Frame solutions for managing risks: Financial risk can be managed through hedging or changes in operational processes.

Step 4 - Implementation of the solution: The agreed upon solution for managing risk is implemented.

Step 5 - Monitoring and reviewing of results: The results of risk management are actively monitored to see if they have the desired results or further action needs to be taken for risk mitigation.

jeff jeffy answered 2 years ago

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