January 04, 2006
 

Risk Diversification

Somewhere in the corner of my brain, I've been thinking about 'Risk Diversification' in various scenarios. Some of the obvious examples which came to mind were:

• Investors putting their money in multiple securities, banks etc.
  
• Banks routing their funds into various channels: debt and equity markets etc.
  
• Venture capitalists funding many companies
  
• In a B2B scenario, firms using multiple vendors and a large client base
  
• In a B2C scenario, retailers sourcing goods from multiple companies and selling to many customers
  
• Companies having offices in multiple locations within a country and outside to protect themselves against sudden changes caused due to economic or political factors
  
• Setting up offices in other locations because of floods or terrorism for that matter!
  
• Customers preferring specific brands, but not averse to having a couple of alternate choices as well
  
• Customers preferring to shop at one location, but being equally aware and inclined to purchase from alternate outlets
  
• Domestic help having jobs in more than one apartment/house
  

There're obviously many more such situations, but these are what came to my mind.

I then realized that an organization's employees were probably among the few folks who could not do anything of that sort without getting into trouble with the employer. So what can employees do to hedge themselves? They can obviously look for another job while still at work. They can improve their various skills through training, self-learning etc. But to me, those seem more like backup plans rather than diversification measures. Is there any other section of society which cannot do risk diversification of any nature? I really couldn't think of any others. Ergo, salaried individuals are worse off than most others.

Rambled @ 5:18 PM

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1 comment(s)

Nitin: Good pullis. I think attending the interviews regularly isn't really a diversification strategy, like I mentioned. It is more of a backup plan. What about the chap who has already got married to someone working in the same industry? I think teachers also don't have too many risk diversification options other than tuitions, anything else? So exactly which of those 5 did you have in mind when you said 'act on it'? :)

By  Jagadish (Jan 6, 2006, 4:50:00 PM)  

I'd prefer if you posted comments with your real name to add more credibility to your opinions. Obviously comments containing offensive and unsuitable language will be deleted. The opinions in the comments are your own views. You are welcome to provide a URL to your own blog, especially if it discusses issues you find here.

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