2. Approaches to the practice of risk management Aa Aa The process of risk management generally consists of three steps. Does the following statement describe the process of risk identification, risk measurement, the selection of a risk management method, or none of these? Identifies and evaluates the potential sources of risk and the positive and negative consequences of the firm's potential risks This refers to the process of: O Risk identification Risk measurement O Selection of a risk management method None of the above Consider the following case Red River Roadways, a U.S. company, hauls freight for Canadian, U.S., and Mexican firms. It currently operates 75 trucks and 300 trailers in all three countries and invoices its customers in their local currencies. Company management is becoming increasingly concerned with its risk exposures and recently expanded the responsibilities of the chief financial officer (CFO) to include a risk management function. Which of the following statements regarding Red River's risk management activities are true? Check all that apply An example of a risk facing Red River is the foreign exchange risk associated with paying bills and receiving payments in U.S. and Canadian dollars and Mexican pesos. One method that manages the language, licensing, and operational complexities and risks associated with using non-Spanish-speaking drivers in Mexico is to subcontract its deliveries to local Mexican freight companies The first step in Red River's risk management process involves measuring or estimating the potential effect of each identified risk It is more theoretically and financially appropriate to segregate and manage Red River's risks on a country-specific basis. This means evaluating its U.S. risks separately from its Mexican and Canadian risks. One way to estimate the possible financial consequences of rising fuel prices and driver wages on Red River's profitability is to use spreadsheets and what-if alternative scenario analyses