Financial Planning 314
Chapter 9
Risk management
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management
General Admin:
Financial Planning 314
• Friday 14th will follow Monday’s timetable.
• Further Assessment (2) to be distributed by the
end of the week. Due 12th of May.
• 20th of April @ 9:00 A1 and FA (1) will be
discussed in class by Dr. J de Villiers-Strijdom
Mr D. Fourie
Gffourie@sun.ac.za
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management
Financial Planning 314
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management
Financial Planning 314
Role of the financial planner in RM:
“Clients are exposed to various risks such as personal, property,
investment and business, that can have disastrous effects on
their financial wellbeing if they are not properly managed. The
challenge for financial planners is to be able to address all
relevant risks appropriately and to formulate strategies to
minimise or mitigate these risks in a financially viable way, in
accordance with the client's goals and objectives.”
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management
Financial Planning 314
Risk:
“a condition in which there is a possibility of an adverse
deviation from a desired outcome that is expected or
hoped for”
Peril:
• cause of an economic loss.
Hazard:
• condition that may create or increase the chance of
an economic loss arising from a given peril
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management
Financial Planning 314
Personal risks include:
• Risks associated with families
• Loss of income
• Risks associated with businesses
• Property risks
• Liability risk
• Investment risk
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management
Financial Planning 314
Risk management process
1. Gather information and determine objectives
2. Identify and establish risk management objectives
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management
Financial Planning 314
Risk management process
3. Develop a risk management plan and consider
risk handling alternatives
Assess impact of risk
• What is the probability? Certainty/timing
• What is the impact? Critical/important/negligible
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management
Risk management process
Financial Planning 314
Risk management strategies
• Risk avoidance
• Risk reduction
• Risk transference
• Risk retention
Low Frequency
High Frequency
Low
Severity
Risk Retention
Risk Reduction
High
Severity
Risk Transfer
Risk Avoidance
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management
Risk management process
Financial Planning 314
4. Implementation of the risk management plan
5. Evaluation and review
Stellenbosch University / Faculty of Economic and Management Sciences / Department of Business Management