Write a 9 pages paper on insurance and hedging processes. The role of insurance management in regards to risk transfer is influentially great, and this is in regards to risk management in particular.

Write a 9 pages paper on insurance and hedging processes. The role of insurance management in regards to risk transfer is influentially great, and this is in regards to risk management in particular. risk management is basically considered as being defined as the executive decisions that surround the management of pure risks, and "As such, risk management is a much broader concept than insurance management because insurance is only one of several methods for dealing with risk. Risk management attempts to identify the pure risks faced by the firm or organization, and uses a wide variety of methods, including insurance, for handling these risks" (Goto, 1997). Insurance in incredibly important and in fact critical in regards to this particular situation, and it is a basically statistics-based type of pooling instrument which is used for risk management based on the law of that of especially large numbers. furthermore, it has a certain essence which, if used appropriately, seems to be rather similar to that of an option contract.

Then there is hedging, which, in finance, is "an investment that is taken out specifically to reduce or cancel out the risk in another investment. Hedging is a strategy designed to minimize exposure to an unwanted business risk, while still allowing the business to profit from an investment activity" (Wikipedia, 2007). Hedging basically allows for the control of risk, as although risk is basically inherent to any type or form of business activity, much of this risk is unwanted and it cannot be avoided without hedging. "Someone who has a shop, for example, can take care of natural risks such as the risk of competition, of poor or unpopular products, and so on.