Components of Risk Management

In my first post, we spoke about what risk management is. In the second, we explored its objectives — protecting profits, ensuring cashflow, and reducing volatility.

So how do we actually put this into practice? It comes down to a few key components.

First, identify the risks — whether it’s exchange rates, interest costs, or commodity prices.

Second, measure their impact — use scenarios and stress tests to see how your business holds up when markets shift.

Third, manage or hedge those risks — through natural offsets, insurance, or tools like forwards and options.

And finally, monitor and control — keeping policies, limits, and reporting in place because risk management isn’t a once-off, it’s ongoing.

Together, these steps form the framework that safeguards your business while giving you the confidence to pursue new opportunities.

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