Using financial tools to minimize the impact of currency fluctuations is an example of what type of risk management strategy?

Question

Quizplus · Accepted Answer

Mitigation strategies aim to reduce the impact or likelihood of a risk occurring. Using financial tools, such as hedging, to minimize the impact of currency fluctuations is an example of a mitigation strategy. By hedging, a company is essentially reducing the financial risk of currency fluctuations on their bottom line. Recovery strategies focus on minimizing the damage after a risk event has occurred, prevention strategies aim to stop a risk event from occurring, and diversification strategies involve spreading risk across a range of assets or markets.

Using Financial Tools to Minimize the Impact of Currency Fluctuations