financial scenario is included with so many risks which you should know about. Foreign exchange risk, Credit risk, Volatility risk Liquidity risk, Inflation risk, Sector risk, Shape risk, Market risk are some of financial risk which are need to good care . Financial risk management is the exposure to financial risk and it develops some strategies to arrange its structure with the guide of financial instruments.
There are many instrument in financial risk management such as :
1 Foreign exchange instruments-
2. Asset class instruments-
3. Primary instruments
4. Derivative instruments-
Hedging is very well known word in financial risk factor.It means to evaporate the risk factor in the time of adverse price situation when requires a simple investment. Financial risk management needs a special care in the proper time to make use its financial instruments for hedging, as you may sell a futures contract to get stock that you had invest,then state to sell it further at same asset price therein.
The right time to hedge financial risk management is when the risks are very down for the firm to handle than to the shareholders to manage them.
Risk management steps:
1. Proper analysis for the possible management actions .
2. Rightly identify the risk.
3. Make a Plan for the unique combination for the mentioned risks.
4. Make risk management plan.
5. Experiment and recheck the plan.
It is not so easy to manage risk in the financial scenario. But keep in mind that, it is very necessary to establishing financial stability in a firm.
