Governments and multinational companies are facing an increasingly uncertain and volatile business environment, both in terms of financial markets and trade in which they compete. As it was stated the areas are increasingly put under the spotlight do not relate to traditional treasury financial risks and risks which can be managed by means of effective insurance arrangements. Therefore, the identification, assessment and control of these business exposures have a significant importance.

Besides, the understanding of the current environment is the main determinant of understanding the exposure. Without determination of exposure, hedging will be impossible.

However, in order to identify the exposure, first of all, we have to discuss the terms of “uncertainty” and “risk” which influence all of the decision-making mechanism of a company. It is widely accepted that the concepts of risk and uncertainty are integral, if not fundamental, constituent elements of process of decision-making within the organisation.

There is always a confusion for the use of “uncertainty” and “risk” terms. Each of them is sometimes used instead of others. Therefore at the beginning the concepts should be clear. “Uncertainty” can be defined as the state in which the number of possible outcomes exceeds the number of actual outcomes and when no probabilities can be attached to each possible outcome while the “risk” is a state in which the number of possible future events exceeds the number of events that will actually occur, and some measure of probability can be attach to them.

The main difference between these two terms is the ability to measure the probabilities. Therefore, where the probabilities are measurable, insurance can be taken out to cover the worst contingencies; the risk of them occurring is spread among many people or taken on by someone however, no insurance company could properly assess what premium to charge to cover bad outcomes; it is simply a possibility that has to be faced.