Final answer:
Hedging is a financial strategy employed to protect against risks, specifically useful for firms dealing with currency fluctuations to secure future contract values.
Step-by-step explanation:
The method of examining and altering a simple financial plan to account for abnormalities stemming from forecasted events is referred to as hedging. Hedging is a financial strategy used by firms to protect against risks, such as movements in exchange rates. A firm, for instance, can enter a financial contract that guarantees a certain exchange rate one year from now, securing the value of a future contract against currency fluctuations. This tactic is invaluable for businesses that have dealings in different currencies that can unpredictably fluctuate, potentially affecting profit margins.