What is a risk?

A risk is a probable issue that might happen, or it might not. There are two main characteristics of risk.

Uncertainty: the risk may or may not happen. This means that there is no 100% risk.

Loss: If the risk occurs in reality, undesirable results or losses will occur.

What is risk management?

Risk Management is the process of identifying, evaluating, and handling risks or threats that have an effect on the capital, finances of your future earnings. These risks can come from different areas, such as legal issues, financial instability, accidents, errors in strategic planning, and natural disasters.

Why is risk management important?

Risk management is important because it helps you to prepare for unexpected circumstances that can range from small problems to major crises. By actively identifying, evaluating, and planning for potential risks, you can protect your financial health, and the security of your dependents. Risk management ensures that potential threats are identified and steps are taken to mobilize resources that can minimize the adverse effects of the occurrence of such risks.

What are the steps of risk management?

The management of risk could pertain to different phases of life like career, education, pre-retirement, retirement and premature death. There are 4 steps to risk management which are:

a. Identification:

b. Assessment

c. Planning

d. Monitoring

Insurance plans to address specific risks based on the identification of your risks will help manage and mitigate the outcome of your risks. The stage of planning for risk involves taking necessary steps to ensure that the effects of a risk materializing should not adversely affect the financial wellbeing of self or the dependents. Periodic monitoring to assess whether the risk management plan is adequate is necessary.