CHAPTER 6 – PERSONAL RISK MANAGEMENT

LESSON 6.1 RISK ASSESSMENT AND STRATEGIES

Learning Goals:

Explain the concepts of risk.

List the three types of risk consumers face.

Describe risk assessment and list four risk stratigies.

WHAT IS RISK?

Risk is the chance of injury, damage, or economic loss Many types of risk you will experience. Some are avoidable and

some are unpredictable and unavoidable.

A loss refers to some type of physical injury, damage to property or disappearance of property or other assets.

Losses could be major and could have a significant effect on your life and future.

Probability is the likelihood of a risk actually resulting in a loss.

Everyone takes risks such as driving, walking on the sidewalk, and engaging in sports activities.

RISKS

Con you avoid all types of losses? No, it is not possible to avoid all risks. Even if you never

left home, there are risks in the home.

What kinds of risks do businesses face? Risks to business owners include economic condition,

competition, changes in technology, and other systemic risks for which a business cannot take action to avoid or lessen the impact. They also face non-systemic risks that can be measured and avoided.

WHAT ARE THE TYPES OF CONSUMER RISK?

Personal Risk Taking personal risk means you could lose something of personal value to

you. For example, you might break your leg or become ill and then not be able to participate in an activity you really enjoy.

Risk of Financial Loss Financial loss refers to a loss in terms of money. Small possible losses

should be assessed differently than large possible losses.

Risk of Financial Resources Risk of financial resources is a serious kind of risk. It could jeopardize your

future. Not only your current income is threatened, you may lose your ability to earn in the future or lose assets you will acquire in the future. Example is you could lose a lawsuit that results in garnished wages.

HOW CAN YOU MANAGE RISK USING RISK STRATEGIES?

Risk Assessment Risk Assessment is the process of identifying

your risks and deciding how serious they are. When you understand your risks and what you could lose, you can make better choices.

Risk Strategies (continued on next slide)

RISK STRATEGIES

Reducing Risks Risk reduction involves finding ways to lower your chance of incurring a loss.

This could be done by changing your actions or other events. For example, you could take ski lessons or avoid hazardous slopes, to lessen the risk of having a skiing accident.

Avoiding Risks With risk avoidance, you stop the behavior or avoid the situation that leads to

the risk. Example, to avoid a skiing accident, don’t go skiing. Avoiding risk, however, means not doing things you want or need to do.

Transferring Risks Risk transfer occurs when you buy insurance to shift the risk of financial loss to

an insurance company.

Assuming Risks Risk assumption is a strategy in which you accept the consequences of risk. One

method of assuming risk is to self-insure, which involves setting aside money to be used in the event of injury or loss of assets.

ASSIGNMENT

Assignment for Lesson 6-1: pg. 192, questions 1-17

Finish Everfi Banking and Savings Modules Check you Budget Challenge. Do you have

any bills that are due? Take the quiz that is due by March 5.