Risk Management Process Flow

[acefrm]

Hello,

On Pg 5 of Crouhy, Chapter 1 Risk Management: A Helicopter View, the Risk Management Process is shown to be breaking off into 2 separate streams, running in parallel after the identification of risk exposures (see pic attached).

I am trying to understand why would this be the case? How can a risk managers find instruments that allows trading or transfer of risks when they have yet to determine the estimation of risk exposures and assess the impact? Shouldn't the risk transference process come after the risk exposure and its effects have been understood?

Thank you very much for your help!

Cheers
Saurav

 

[ShaktiRathore]

Hi
Yes the exposures are identified and measured in parallel to knowing what instruments could be used for hedging those exposures,we are not actually hedging those exposures yet but have identified what instruments could be helpful to do away with risk,the actual implementation of hedging exposures(once exposures are measured and instruments to use identified ) thru these instruments takes place in joint step of "form risk mitigation strategy".
Thanks

 

[acefrm]

Great. Many thanks for clarifying that @ShaktiRathore