Tuesday, 26 November 2013

The Risks We Take But Don't See

I was riding a very overcrowded bus a few nights ago. And I couldn't help overhearing two guys talk about what I can only assume is a BPO company they're working for.

One guy was recounting how the company is now letting workers go if the client did not like the support work that they did. Now, it may seem like a rather cavalier way to decide when to let someone go. But what really grabbed my attention was that a BPO - a booming industry, from most accounts - is letting people go too.

And I remembered other news I heard of as well. Last year, just before Christmas, a U.S. based company with operations here in the Philippines let 100 people go (though no one from the Philippines was let go). And an Australian-based company let go over 30 people from the Philippine office. And the year before that, about half a dozen people were let go in my company. And me and my wife, at two different points, came close to losing our jobs through no fault of our own.

This got me thinking. A lot of times, when we think of risk we think about the negative effects we might suffer when we venture out into new or unfamiliar territory. 

For example, it's not uncommon to hear that stock trading is a gamble. Or that it's better to keep money in the bank, because it's safe, rather than in a mutual fund that carries risks. Or, my personal favorite, how it's safer to get a job than be self-employed or have our own business.

But the way I see it, everything we do is a risk. It's just a matter of how visible it is to us or how much we know about it. So we stay in our comfort zones, not aware that staying has a price too.

Take banks for example. They're the safest place we can put our money in. Even if it gets robbed, our money is insured. And returns are guaranteed too.

But even this carries a risk we don't see. Our money is physically safe, but its purchasing power - the only real purpose of money - is steadily going down because of inflation.

Even though we're choosing to keep our money safe, we're just exchanging monetary value for physical safety. But we don't see the value of our money going down so we don't think much of it.

With stocks and equity funds, on the other hand, we see it crash and rise all the time. It's very easy to see that we could easily lose our money. 

The same is true for employment. We feel that being an employee in a large, profitable company is safe. This is because we just have to work a set number of hours and, no matter what, we get out salaries regularly.

But companies are just businesses. They'll go through periods of profits and losses too. Just like we would if we put up our own business. The only difference is that we can't see the company books. We're not the ones dealing with the poor sales or bad business climate.

That's why I think it's important to really increase our financial literacy. It's not just about making money or investing. It's also about understanding our situation and weighing risks.

Are our savings working towards a goal, or is it just sitting there waiting to get spent? Is it enough to just keep our money safe in the bank? Or do we end up losing more value by not risking it? Do I need those extra returns from stock trading, or am I just taking on more risk? 

It's not my place to tell anyone what to do with their money. But I do hope that what I've written so far is enough to get people thinking.


Surbhi Maheshwari [MBA Fin / Mktg ] 
Manager Finance
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