Tag Archives: mitigating risk

Managing Personal Risk

Going for a walk on a crisp cold day following a thaw can be tricky, one must be careful not to slip on the ice and possibly break something or worse.

This raises an interesting question, what is the best way to determine whether to eliminate your risk and not walk (although this could have other health impacts) or is a walk on an icy day an acceptable personal risk.

Benefit

The primary consideration of any undertaking should start with the simple value equation.  That is considering the benefit versus the cost.

In my very real example of going for a walk on an icy day the primary benefit is health based both physical and mental.  The magnitude of the benefit varies widely depending on each persons current state but each of us can subjectively assess the benefit to us.

The direct cost is zero, their may be some indirect costs which probably are mostly related to the results of injury or some related incident like a dog bite or catching some disease from another walker.  If these risks don’t occur the walk is likely free.

Likelihood and Impact

If the value equation suggests proceeding makes sense a more rigorous analysis of the risks is called for.   In particular if the risk event occurred how bad would it be and of course how likely is it to occur in the first place.

In the case of walking on an icy day falling and hurting yourself, (potentially quite significantly) is higher than on a warm dry day but can be mitigated by walking carefully.

However, perhaps your experience with walking on ice is limited and thus the risk is not that easily mitigated.  In that case perhaps foregoing the walk makes sense.

Assess and Proceed

The key to effective personal risk assessment is to actually do it.  This is a very effective way to limit negative impacts as you wend your way through life’s journey and it works.

 

Investment Risk Management – more thoughts

I continue to blog on and off about investing.  That is expending money with the expectation of a profit or positive material gain.  Of course just expecting profit or material gain does not make it so.

Things to avoid

Obviously the number one event to avoid when investing is to have a return of less value or benefit than the original amount invested.  More simply stated “taking a loss”.

It is easy to conceptualize this goal, it is a little harder be confident in it’s achievement.  Simply stated, when investing you run a risk of loss  and taking steps to mitigate that risk is just prudent.

There are many approaches to mitigating risk.  Some common terms you have probably heard include diversification, hedging, insurance, guarantees and holding real property (e.g., gold bullion).  To nane just a few.

Top Risk Mitigator

My own personal approach to reducing  risk, the first thing I always do, is my own research, not relying on someone elses.  This does not mean other advice, research and consultation is not extremely valuable.

It simple means you are the one expending the money so only you can properly understand and accept the risk.  This is no ones decision but your own.

Regardless of any specific risk mitigation actions you might take (diversification, guarantees and so on) the first step toward risk mitigation is the expenditure decision itself.

My advice, never delegate that and never let anyone persuade you as to what is the best decision.  In this case, only you can choose wisely, it’s your money (of course it it all about you).