What is Financial Risk Management

Financial risk management is the process of identifying, evaluating, and selecting investments based on risk acceptance or risk minimization. The financial manager must use the financial instruments at his disposal to protect the company from these risks, which can be quantitative or qualitative. For instance, international banks adopted the Basel Accords, a set of rules to monitor, report, and expose credit, marketing, and operational risks. In essence, risk management is the process by which a fund manager or investor assesses and makes an effort to quantify the possibility of loss in an investment.