Risk management

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Financial risk management refers to the practice of using financial instruments to manage exposure to risk, particularly credit risk and market risk, also called systemic risk. Financial risk management includes identifying the sources of risk, measuring it, and making plans to address risks. In particular, financial risk management focuses on hedging using financial instruments to reduce risk exposures.

Internationally, the Basel Accord, an agreement among various countries' representatives in Switzerland in 1988, was set up to standardize risk-based capital requirements for banks across countries and to track and expose credit and market risks.