ABSTRACT
This chapter shows that financial risk management planning consists of four components, namely, risk identification; risk quantification; risk response strategy; and risk monitoring and control. Risk quantification assesses the magnitude of the identified risk and its impact. Risk response has the objective of identifying the options available and defining the appropriate actions to enhance the opportunities and minimise the threats. Risk monitoring and control keeps a close watch on the identified risks, outstanding risks and any new arising risks. Basically, financial risk management is the identification of what may go wrong and taking the appropriate action to mitigate the risk. Financial risk management focuses on when and how to hedge using financial instruments to manage harmful exposures to risk. Risk provides the basis for an opportunity to make a gain; usually the higher the risk the higher the gain. Speculative Risk involves three possible outcomes, namely loss, gain or no change.
