Risk is a fact of life. We might not like it, but it’s not going away.
Risk Management in personal finance is an important and critical part of the financial planning process. Every day we are exposed to a variety of risks like loss of family income from death, disability or illness; flood or fire doing damage to our house or vehicle; a sudden medical emergency involving high costs for treatment draining our finances; loss of employment or other circumstances beyond our control. It can come in many forms but the result is always the same : loss of money.
Thus it raises few questions :
- Is my family financially secure in my absence ?
- How much risk do cover I need ?
- Have I covered myself and my family to meet medical emergencies ?
- Do I have 6 months of expenses for contingencies in case of a job loss or disability ?
- Are my assets like house, vehicle and other valuables protected against any loss ?
A large unforeseen and unfortunate event like the above, has the ability to drain all of our financial resources, ruining our way of life and undermining our financial plan. Managing risk helps mitigate potential financial losses and ensures that our way of life can remain unaffected largely by such unavoidable events. The primary goal of personal risk management it to protect one’s goals, dreams and personal well-being from those “what ifs” to “what now”.
Risk Management is a process which involves the identification of the cause and nature of the risk, how much risk a person may be willing to retain and how to handle the Not-retained risks. Also Risk Management is not static. The risks that we face and the strategies that we use to protect ourselves also change as our personal financial circumstances change and depends on the stage of our financial lifecycle. There are ways to deal with different kinds of risks which may include risk avoidance, risk retention, risk reduction, risk sharing and risk transfer. It is intended to provide financial security through the use of financial strategies, tools and services. These are used in the attempt to mitigate large financial losses if and when they occur. A comprehensive risk management strategy will include the consideration of personal, property and liability risks.
One of the most popular ways to manage financial risk is through the purchase and use of insurance. Insurance protects its policy holders from large and unexpected financial losses, by compensating them, as per their contractual obligation. This form of risk management is often referred to risk transfer.
Our well trained and experienced team will help you understand and manage risks without any bias and guide you through the entire process. In fact the first step in the whole financial planning process should start with Risk Management.