Having worked with multiple family offices, asset managers, professional law firms, and auditors, I’ve come to appreciate the incredible work they do in identifying risks and potential causes of loss for families, businesses, and individuals (F.B.I).
Once these risks are identified, there are three key strategies to manage them:
- Retain the Risk: This means self-insuring. Some F.B.I. entities have sufficient income or assets to handle a certain amount of risk internally.
- Avoid the Risk: Once a risk is known, F.B.I. can take steps to steer clear of it. While avoiding risk is the ideal solution, not every risk can be avoided or retained, making the third option crucial.
- Transfer the Risk: For risks that F.B.I. cannot keep or avoid, transferring them to a risk pool is the next best solution. Typically managed by insurance companies, these risk pools can take on the risk for a modest premium.
Every lawyer, auditor, and family office advisor uses a combination of these three methods to effectively manage the estate and wealth of F.B.I.
If you believe this information could be useful for you or someone you know, please share this article.
