Introduction We come across so many events in our life which can cause financial losses for us like hospitalization, loss of wallet in a crowded market place, accident to our vehicle, etc. It is not possible to take risk cover for all such events. Some events may not even be covered by Insurance companies. Before we take insurance policies to cover the risk, the events that we are likely to face needs to be analyzed for magnitude of impact and frequency with which it will occur. Some events may occur frequently, but the impact of the event will be insignificant for e.g cold or a cough – the frequency of event is high atleast 3 times in a year, but the magnitude of impact is insignificant. Some event could be low frequency event and also low impact events like losing of wallet. It may happen once or twice in our life time and all we may lose is the money in the wallet. Different strategy are needed for different categories of event. High Impact – High Frequency Events Accidents while Skiing or mountain climbing or any adventure sports Infection for person having AIDS Heart attack for Obese and diabetic patient High Frequency and High Impact events will not be covered by Insurance companies. Hence it will have to be managed by us. Strategy to be adopted to handle these risks – RISK REDUCTION A diabetic person should have proper diet and regular exercise and reduce the risk of heart attack, since his hospitalization expenses will most likely not be covered by Insurance. High Impact – Low Frequency Events Death of Earning member of a family (Happens only once in a life time for a person. Hospitalization (may happen once in 4 or 5 years) Since frequency is low (though impact will be high), Insurance companies will be happy to take over this risk from us for a premium. Hence for High Impact and Low frequency events strategy is to RISK TRANSFER. The financial risk now is part of Insurance company and for taking the risk Insurance company will charge a small premium. Low impact – High Frequency Events Cold/Fever (for some it may happen every month) The impact being low we can focus on reducing the frequency through RISK AVOIDANCE strategy. By avoiding walking in early morning cold or by avoiding getting in touch with other who have diseases, frequency of cold/fever can be reduced Low Impact – Low Frequency Events Losing wallet Missing a flight or a train The impact is also low and frequency is also low. In such a scenario, ignore the Risk and bear the risk if it happens. This strategy is called RISK RETENTION