We are constantly managing risks throughout our lives - either during simple tasks (such as driving a car) or when making new insurance or medical plans. In essence, risk management is all about assessing and reacting to risks.
Most of us manage them unconsciously during everyday activities. But, when it comes to financial markets and business administration, assessing risks is a crucial and very conscious practice.
In economics, we may describe risk management as the framework that defines how a company or investor handles financial risks, which are inherent to all kinds of businesses.
For traders and investors, the framework may include the management of multiple asset classes, such as cryptocurrencies, Forex, commodities, shares, indices, and real estate.
There are many types of financial risks, which can be classified in various ways. This article gives an overview of the risk management process. It also presents some strategies that can help traders and investors mitigate financial risks.