Page 156 - RISK Management IC 86

Risk Management

hard a person tries, it is impossible to avoid all risks or
even minimize all risks. So one has to balance costs against
benefits. The ordering of those costs and benefits depend
on an individual's attitude to risk well as the size of the
potential adverse consequences.

Most people's lifetime income rarely matches his
expenditure. However prudent a person is and tries to
balance income and expenditure, his plans may be upset
by the following:
(i) However certain may be of one's knowledge of levels

of earning at different ages, unemployment, incapacity,
or death may upset one's plans.
(ii) Although death is certain, its time is uncertain, so
premature death or living beyond expectancy can both
upset the planning.
(iii) Fluctuations in price levels and inflation are very hard
to predict and even harder to plan.

Compulsory contributions, entitlements and benefits
automatically readjust to changing circumstances, such
as changes in dependents. So in a way social security
provides partial risk reduction. Insurance can be bought
for additional protection. Whether insurance chosen is

Sashi Publications - www.sashipublications.com 157

Copyright@ The Insurance Times. 09883398055 / 09883380339