Risk Mitigation for Wealthy Families


For many years’ wealthy families have only used “risk management” for their investment portfolio’s success and their insurance risk. One of the biggest risk for a wealthy family is loss of money, however “money” is so vague that it can be used in nearly any argument and topic. A wealthy person realistically should be worried about the following risks:

Cash Flow – A loss of cash flow due to decreased income because of a failing business, health care expenses or even familial expenses can cause a dent in the coffers of any family. For wealthy families this is often worse as the expenses are higher, so a big dip in income for a wealthy family could mean serious issues.

Property – Real Estate prices can fluctuate, property can be damaged and tenants could refuse to pay rent or you could be wealthy enough to be a target for robbery. These are all reasons as to why real estate is a risk for the wealthy person. Just like, cars, jewellery and even something such as trademarks, all forms of property can be stolen and damaged.

Personal Security & Personal Liability – As a wealthy person odds are a few people in a few circles will most likely know your name. This provides a great risk to your personal security. Minimizing your liability from your board of directors actions is also a major factor you will have to consider as you could be held liable for your businesses actions if you are not careful with a lawyer.

It is imperative that wealthy families identify the risks, assess their level of exposure to those risks and evaluate the cost and effectiveness of various prevention methods and mitigation efforts, as well as insurances that are in place.
Not all risks can be transferred through insurance for example, and because of costs involved it makes some sense to take actions to reduce exposure to those risks and identify if there is any part of the risk that can be transferred via legal loopholes for example.

Once risks have been identified, assessed and mitigated all other risks should be reviewed through insurance. By design insurance is used for low likelihood, high cost events. In order to prevent the most amount of risk through insurance it’s vital that you produce an ironclad policy and an expert to assess if the true risks are properly covered.
Financial assets are getting harder to protect, the management of risks require a detailed and thorough approach which will most certainly call for several advisors, insurance agents and attorneys.

It is important that wealthy families do not underestimate the risks that they might face from criminals … such as small-time criminals and organized crime. Risks, where insurance coverage cannot really help, could include but are not limited to blackmailing, bribery, kidnapping, theft, fraud and burglary. It is important to have preventive security measures and risk mitigation procedures in place, in order to be able to respond to upcoming threats quickly and in the most effective way.