Final answer:
Strategies, tools, and instruments to mitigate financial risks, operational risks, and international trade risks include diversification, hedging, insurance, internal controls, business continuity planning, contingency planning, contractual agreements, letters of credit, and foreign exchange hedging.
Step-by-step explanation:
Financial Risk Mitigation:
- Diversification: Spreading investments across different asset classes to reduce the impact of potential losses.
- Hedging: Using financial instruments such as futures contracts or options to offset potential losses by taking opposite positions.
- Insurance: Purchasing insurance policies to transfer financial risk to an insurance company.
Operational Risk Mitigation:
- Internal Controls: Implementing proper procedures and checks to prevent errors, fraud, or other operational failures.
- Business Continuity Planning: Preparing for potential disruptions and developing strategies to ensure minimal impact on operations.
- Contingency Planning: Identifying and planning for potential risks and challenges that may arise in day-to-day operations.
International Trade Risk Mitigation:
- Contractual Agreements: Using legally binding contracts to mitigate risks related to non-payment, delivery delays, or breach of agreements.
- Letters of Credit: Obtaining letters of credit from banks to guarantee payment in international trade transactions.
- Foreign Exchange Hedging: Using financial derivatives to mitigate risks associated with currency fluctuations.