【正文】 probability often fail in the analysis of financial markets. Risks usually do not exist in isolation, and the interactions of several exposures may have to be considered in developing an understanding of how financial risk arises. Sometimes, these interactions are difficult to forecast, since they ultimately depend on human behavior. The process of financial risk management is an ongoing one. Strategies need to be implemented and refined as the market and requirements change. Refinements may reflect changing expectations about market rates, changes to the business environment, or changing international political conditions, for example. In general, the process can be summarized as follows: Identify and prioritize key financial risks. Determine an appropriate level of risk tolerance. Implement risk management strategy in accordance with policy. Measure, report, monitor, and refine as needed. Diversification For many years, the riskiness of an asset was assessed based only on the variability of its returns. In contrast, modern portfolio theory considers not only an asset’s riskiness, but also its contribution to the overall riskiness of the portfolio to which it is added. Organizations may have an opportunity to reduce risk as a result of risk diversification. In portfolio management terms, the addition of individual ponents to a portfolio provides opportunities for diversification, within limits. A diversified portfolio contains assets whose returns are dissimilar, in other words, weakly or negatively correlated with one another. It is useful to think of the exposures of an anization as a portfolio and consider the impact of changes or additions on the potential risk of the total. Diversification is an important tool in managing financial risks. Diversification among counterparties may reduce the risk that unexpected events adversely impact the anization through defaults. Diversification among investment assets reduces the magnitude of loss if one issuer fails. Diversification of customers, suppliers, and financing sources reduces the possibility that an anization will have its business adversely affected by changes outside management’s control. Although the risk of loss still exists, diversification may reduce the opportunity for large adverse outes. Risk Management Process The process of financial risk management prises strategies that enable an anization to manage the risks associated with financial markets. Risk management is a dynamic process that should evolve with an anization and its business. It involves and impacts many parts of an anization including treasury, sales, marketing, legal, tax, modity, and corporate finance. The risk management process involves both internal and external analysis. The first part of the process involves identifying and prioritizing the financial risks facing an anization and understanding their relevance. It may be necessary to examine the anization and its products, management, customers, suppliers, petitors, pricing, industry trends, balance sheet structure, and position in the industry. It is also necessary to consider stakeholders and their objectives and tolerance for risk. Once a clear understanding of the risks emerges, appropriate strategies can be implemented in conjunction with risk management policy. For example, it might be possible to change where and how business is done, thereby reducing the anization’s exposure and risk. Alternatively, existing exposures may be man