About Debt - part 2

Risk Management
The process of formulating the benefit-cost trade-offs of risk reduction and deciding on the course of action to take is called risk management. People at times express regret at having taken costly measures to reduce risk. The appropriateness of a risk-management decision should be judged in the light of the information available at the time decision is made.

Types of risks
We distinguish among five major cateogries of risk exposure for households:
Sickness, disability and death: unexpected sickenss or accidental injuries can impose large costs on the people because of the need for treatment and care.
Unemployment risk: this is the risk of losing one's job.
Consumer-durable asset risk: this is the risk of loss arising from ownership of a house, car, or other consumer-durable asset.
Liability risk: this is the risk that others will have financial claim against you.
Financial-asset risk: this is the risk arising from holding different kinds of financial assets such as equities or fixed-income securities denominated in one or more currencies.