Category:Risk And Reward

Risk and Reward is one of the four content areas of the Financial Competence Framework^[1]

This content area covers the knowledge, skills and attitudes related to the identification of risks; financial safety nets; insurance; and balancing risk and reward.

The objective of this content area is to cover competences related to assessing risks, understanding how to mitigate them through insurance and financial safety nets, and understanding the trade-offs of assuming risk.

To identify risks properly is important for the financial well-being of an individual, as being aware of risks is fundamental when taking financial and other types of decisions. The competences in the first section cover the basics and sources of risk, including risks inherent in financial products and risk that can be hedged and insured against.

Depending on people’s preferences and circumstances, it may also be important to mitigate risks. Therefore, the section covers competences related to financial safety nets and insurance. These competences can help reduce both the risk and unexpected negative shocks that can affect financial well-being.

Risk is also a fundamental concept in investment, as higher expected or required returns tend to lead to a higher risk. The section therefore also covers investment-related competences.

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