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Proof That Preparing for the Unknown is Possible.

Risk Management is the Best Way to Guard Against Murphy’s Law.

Have you ever been in a phase in life when you just feel like everything is going wrong all at the same time? It feels like it’s one problem after another. Your car breaking down, then your child is falling sick, then there’s retrenchments at work. In the black culture some of us would joke about it and say “you need to consult” but in actual fact it’s just life happening. We call this Murphy’s Law – Anything that can go wrong will go wrong. Yes, it may feel unfair or that you don’t deserve such but life can get the better of all of us.

The opportunity now arises for you to use this opportunity to assess your personal risk. Before I go any further let me elaborate on what risk is: whilst risk can have varied definitions this one sticks out the most: “risk is a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for”. A desired outcome can be hopes to keep your car for the next 5 years or wanting your children to be healthy at all times (because, I mean you feed them healthy food, so what else could go wrong? Right?) Or even anticipating that you will keep your job for a long time. But unfortunately not everything happens the way we would like them to, the world can throw us a few spanners. But that shouldn’t deter us. It should actually motivate us to plan for the future and reduce the chances of bad situations becoming even worse because of the lack of financial planning. So here’s the solution: RISK MANAGEMENT.

“Risk is a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for.”

Risk management is the when we plan ahead to insure that you are taken care of financially in various case scenarios that may crop up in life. Because of the varied amount of situations that can crop up. Yes, you may not have everything planned for, but you can definitely try. I mean we all wish we had a third eye or be able to predict the future, but unfortunately that’s not the case. So what do we do, we plan! We decisively and intentionally plan for the unforeseen so that if that time ever had to arise, guess what? you have a solution. Identifying the possible risks, assessing the importance of the risks, implementing a plan for these risks and monitoring the benefit of the plan is important when we want to reduce risks that are apparent in our lives.

1. Identify the Possible Risks

The identification of the possible risks that you may incur is part and parcel of creating solid plan for managing these risk, after all you can’t plan for something you don’t know about. I must add that it’s not definite that these risks may happen, some are an eventuality and some are things that we hope don’t happen but want to be prepared for if they do.

The identification process includes drawing up a table also known as a “Risk Inventory” stipulating what could happen in your life that may place you in an unexpected situation. Below is a table that can assist you in drawing up a risk inventory list of factors that could be undesirable:

Now some of these risks may be standard for everyone and others are specific to your life. Delving into this will provide an appropriate environment to start planning for these risks and don’t forget to add and subtract based on what is important to you and the risks that could be apparent in your personal life.

2. Asses the Importance of the Risks

Once you have identified these risks, it’s important to evaluate the importance of these risks to your specific scenarios. This includes whether you are willing to take on the effects of the risk or whether they would be too dire for you to handle the financial burden thereof.

The first step is assessing the seriousness of the impact of this risk should it arise. You can choose between high, medium or low. The seriousness of this risk is based on the potential impact or the size of the impact this would have in your personal life. The next step is to identify the probability of this risk happening. Using the same criteria: choose between high, medium and low to identify the probability of this risk happening.

Once you have created your risk inventory table and assessed the seriousness of impact and the probability of this risk occurring, then this is where you can evaluate which risk needs to be mitigated urgently and those that need to be integrated into your financial plan with time.  

3. Implement a Plan for The Identified Risks

We can plan as much as we want but what becomes apparent in implementation is the ability to action your plan. This is where we discuss disposable income. Disposable income is the income that remains after all your expenditure has been taken care of. This is where you are able to creating a plan based on the money you have available. In this instance there are financial products that allow you to insure against the risks that you have identified. These vary from emergency funds, short term insurance, medical insurance and long term insurance.

Depending on what you have identified as risks that need attention you then need to find a financial product that will alleviate you from the risk that you identified. This may be a daunting task and sometimes the terminology and jargon can seem a bit too complex to understand. Having a financial planner that can review your assessment of risks and recommend the best financial product to alleviate these risk will put you at ease.

4. Monitor the Benefit of Your Risk Plan

Once you have identified and implemented the risks that you think need to be implemented, it is important on a continuous basis to monitor the value of the financial products you have chosen. It is also important that you also re-evaluate the risk inventory that you have set out at the beginning. Life changes all the time. There are new aspects that may come up in your life that may require you to plan for them and asses their risks. So in doing so, monitoring your risk on a continuous basis will allow you to have a long term risk management plan that takes care of the risks that may happen.

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Thandekile MolokoHead Wealth Manager

Thandekile Moloko is a Wealth Coach and Wealth Manager by profession. Her love for people and changing people’s lives lead her into the financial planning. She encompasses tenacity for finance, especially wealth management and personal financial management. With insurmountable experience gained in the industry, she has blazed the market with her expertise within the financial planning industry. With the intent of reaching a larger audience. In her wealth management career, she has changed many people’s lives and she changed the landscape of wealth management to be inclusive of those that need it the most. She is an avid believer in changing lives one financial situation at a time.

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