Risk management is the process of measuring or assessing risk and developing strategies to manage it. Strategies include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.
Traditional risk management focuses on risks stemming from physical or legal causes, examples of which include natural disasters or fires, accidents, death, and lawsuits. Financial risk management focuses on risks that can be managed using traded financial instruments.
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