Risk Mitigation Instruments

Risk mitigation instruments are financial tools or strategies used to reduce the impact of potential risks. They help organizations or individuals protect against uncertainties like market fluctuations, natural disasters, or credit defaults. Examples include insurance policies that provide compensation after a loss, hedging contracts that fix prices or rates, and diversification strategies that spread investments to lower overall risk. These instruments don't eliminate risk but aim to control and manage it, making it more predictable and less damaging if adverse events occur.