The Importance Of Risk Management

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Excusive Summary
This paper briefly discusses the importance of risk management.
Then, the paper analyses the use of derivative instruments that American Airlines to manage its business risks.

What is risk management? Risk management is a method to reduce the risk of operating company when the company faces an open market, laws and regulations repeals’ of prohibition and new product creation because these three challenges will increase the changes in volatility(increasing the operating risk of company)of the company. A good risk management will help company to reduce the probability of making wrong strategy decision in order to diminish the probability of loss and this method will raise the relative add value of enterprise consequentially.

Why manage risk? Why we should do the management risk? Obviously, the purpose of risk management is that we want to identify potential risk, reduce or allocate risk, provide the best choice and make the plan of strategy based on the reasonable basis by analyzing risk. By evaluating risk, you will enhance the chance of gaining profit. Additionally, continuous risk management will help managers at all levels to make informed decisions on issues in regards to all related risks. Risk management is not only good for the company, it is also beneficial to the family and society.

For the company:
1. Risk management is beneficial to maintain the stability of the enterprise production and operation. An efficient risk management will
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