Hedging and Risk Management

Hedging and risk management are strategies used to protect against unexpected losses in investments or business operations. Hedging involves taking steps to offset potential losses, often by using financial instruments like options or futures contracts. For example, a farmer may sell futures contracts to secure a price for their crops, reducing the risk of price drops. Risk management, on the other hand, encompasses a broader process of identifying, assessing, and prioritizing risks, followed by implementing measures to minimize their impact. Together, these practices help individuals and organizations maintain stability and achieve their financial goals despite uncertainties.