1. Prevention. Eliminate the factors that cause loss or damage so that damage does not occur, such as fire prevention, theft prevention, encryption of deposit certificates, hedging in foreign exchange trading, breakeven point analysis in investment decisions, etc.
2. Inhibition. Reduce the degree, frequency and scope of loss or harm to an acceptable level. If limits are set on the investment amount, transaction price, and costs, they must not be exceeded. In terms of process, suppression includes prior control and full-process control, such as cost planning, total quality control, etc.
3. Dispersion. In investment and financial management, diversifying investment risks means preventing all-or-nothing investments. A prudent family that is good at financial management will spread all financial resources among savings deposits, creditworthy bonds, stocks and other investment instruments. In this way, even if some investments suffer losses, the entire market will not be lost.
4. Transfer. Transferring risks is not about beggar-thy-neighbor or benefiting oneself at the expense of others. Transferring risks refers to transferring risks to institutions or individuals that are specialized in bearing risks, such as insurance companies, guarantors, acceptors, etc. Common methods of transferring risks include: purchasing insurance from an insurance company; setting up a guarantor in debt investment; in order to avoid losses caused by changes in interest rates, exchange rates, and prices, conduct hedging transactions in the trading market, sell futures when buying spot goods, or sell futures. Buy futures when they become available, and so on. Transferring risk means transferring risk to others, and then you have to pay a certain price for this risk transfer, such as paying insurance premiums or reducing transaction profits, such as the reduction in hedging transaction profits. The role of risk transfer is to transform unforeseen, uncontrollable, and possible damages into foreseeable and controllable costs or expenses, which is conducive to stable investment operations, good control and accounting of costs and benefits, and in the event of Sufficient compensation can be obtained in the event of a loss to restore family life or investment and business.
5. Commitment. The assumption of risk is the loss or injury caused by one's own risk. The main reasons why families bear risks are: ① unable to recognize the risks faced by the family and are in a blind state; ② the risks faced by the family are not large, or the risks are large but there are protections from outside the family, and the family itself can bear the losses caused by these risks or injury; ③ The family is short of financial resources and unable to purchase insurance or take other corresponding measures; ④ Adopt "self-insurance" methods to enhance the ability to withstand risks. "Self-insurance" means self-set insurance.