* Not having sufficient savings to live comfortably when you retire. You may have lost your money in the stock market or you may not have planned carefully enough and put enough money aside for your old age. To manage risk you would need to figure out how much you would need to invest in an IRA or other interest bearing account, so you will be okay when retirement rolls around.

* Liquidity risk is the risk that you may need cash right away, but you are unable to get it because your money is tied up in assets instead of cash and it will take time to sell, such as real estate. What if you lose your job or a medical emergency came up and you couldn’t work. To practice management risk you could leave a portion of your money in reserve, like an offset mortgage account or redraw facility. If you do not own a house you should have at least a few months income in a cash management trust. If you are employed and rely on your income to live, you should purchase income protection insurance. You can take out the basic insurance quite reasonably by looking into a group rate.

* Credit risk is another area where you might need management risk. The risk here is the fact that you have lent out money to someone who will not be able to repay it. This applies to individuals, as well as organizations. To manage this credit risk you need to look into the ability of a borrower to repay a loan. You would need to check the credit rating of the borrower. The bottom line is, if anyone wants to borrow money from you and is willing to pay it back with a high rate of interest, beware. They most probably have already been to a financial institution and have been turned down.

All of these risks need to be managed in your life and this is where management of risk comes in.

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