Hello learners. I am Fenrir. Today we are entering the defense zone. We have talked about building wealth but now we must talk about protecting it. This lesson is about Risk. Risk is the possibility that something bad will happen to your financial well being. Aware of risks in a financial context including those inherent in products and those that can be hedged or insured against. Some risks come from the products themselves. For example using variable interest rate products linked to Euribor means your payments could skyrocket if the European Central Bank rates change. Or committing to fixed interest rates in a variable interest rate environment might mean you miss out on savings. Taking out products in foreign currencies exposes you to exchange rate risk which is vital to understand in the single market. But there are also significant external issues that may impact on personal financial well being. These include environmental technological health related scientific security or economic factors. You must consider the risks of significant projects or purchases. What if you lose your job after buying a big house? Takes into account the risk of changes in circumstance including job loss increased outgoings or other external events. You must also consider the risk of losing some or all household income through ill health disability or death of a family member. These are heavy topics but you must be motivated to mitigate risks when necessary. Start by identifying your own risk tolerance. How much uncertainty can you handle? Be confident to make your own assessment of risks without being unduly influenced by marketing or news items. This is avoiding availability bias. Just because you saw a plane crash on the news does not mean flying is the biggest risk to your life. Similarly do not let sensational financial news panic you. Look at the data. Be aware of possible risks with financial implications including political and economic shifts within the EU. Knows why it is important to be aware of low probability high cost events such as the risk of climate related events like floods or wildfires which are becoming more common in Europe. Finally be aware of the specific risks related to digital financial products and services. Mobile banking and peer to peer platforms are convenient but carry tech risks. Aware that some digital financial products and services such as crypto assets or initial coin offerings are riskier than established financial products because they are less regulated or even unregulated. Pays particular attention to risks related to financial products based on emerging technologies.Because these risks are so real we need a shield. That shield is Insurance. Understands when financial risks can be more appropriately managed with or without insurance. You cannot insure against everything but you can insure against the big things. Aware that certain risks with financial implications can be reduced by using certain financial products and by taking action such as buying insurance or acquiring financial products with capital guarantee. You need to know when insurance is a legal obligation. For example in most EU countries third party car insurance is mandatory by law. Knows which insurance products are designed for which situations. There is a big difference between Life and Non Life insurance. Life insurance pays out when you pass away helping your family survive. Non life insurance covers property health and liability. Aware of the risk of being underinsured and costs of being overinsured. If you are underinsured you will have to pay for a disaster out of your own pocket. If you are overinsured you are wasting money on premiums for protection you do not need. Find the balance. Considers the benefits of insurance when risks have been identified. Be aware that insurance offers and insurance premia may be based partly on certain personal information that is processed via big data and other data analytics. Your driving habits or health data might influence your price but remember your GDPR rights protect how this data is used. Takes into account the way in which certain actions and behaviours will impact on insurance coverage. Periodically checks that the insurance held is still providing adequate cover. As your life changes your insurance should too. Takes steps to insure against low probability high cost events like major floods or fires. Aware of the ways to insure against climate related risks. Able to assess the climate related personal risks and is able to insure against them if appropriate. Also be aware of the existence of digital insurance providers and of new types of insurance offered by them such as peer to peer on demand or usage based insurances. Aware that digital insurance providers and the products offered by them might function differently than traditional insurance providers. Read the terms carefully. Claims on the appropriate insurance if necessary. That is what it is there for.Insurance protects you from bad luck but who protects you from bad people? We must talk about Scams and Fraud. Knows about the risks of financial scams and frauds when choosing and using financial services and making financial transactions. Criminals are always inventing new tricks. Stays informed about new scams and fraud techniques and schemes. You must be careful when carrying out online financial transactions in order to avoid becoming a victim of fraud. Understands the importance of keeping personal data financial information and security information secure including passwords and pin numbers. Never share them. Aware of kinds of risks stemming from digitalisation such as the misuse of personal financial data cyber crime phishing pharming and hacking attacks. Phishing is when they trick you into clicking a link. Pharming is when they redirect you to a fake website. Understands how online digital scams and fraud such as phishing and pharming work. Understands the concept and implications of online identity theft. If someone steals your identity they can ruin your credit across borders. Takes practical steps to keep all personal data financial information passwords and pin numbers secure. Use two factor authentication also known as Strong Customer Authentication under PSD2 rules. Understands that there are client authentication and authorization processes for both online and in person payments to protect against fraud. Do not bypass them. Also be aware of ransomware. Does not make any payment to lift products or accounts blocked by ransomware. Paying criminals only encourages them. Confident to take the necessary steps when confronted with suspicious requests for information or actions such as blocking your bank card or informing authorities. Motivated to learn how to detect and avoid scams and fraud. Your vigilance is your best defense.The final layer of defense is knowing who to trust. Aware of the existence of fraudulent investment schemes. Knows how to spot signs that something or someone may not be genuine. If an offer promises guaranteed high returns with zero risk it is a lie. Confident to question communications offers and recommendations if they appear to be fraudulent. Makes an effort to scrutinize communications offers and recommendations and consider whether they are genuine. Speaks only to verified representatives of financial institutions. Do not talk to cold callers. Another form of deception is Greenwashing. Understands the concept of greenwashing and its implications. This is when a company pretends to be eco friendly to get your money. Adapts investment decisions when one becomes aware of instances of greenwashing. Look for the EU Ecolabel or other verified standards. Do not support liars. If you spot a scam you must act. Knows to whom to report suspected scams and frauds. Identifies the sources available for information on reported scams and fraud. Aware of the authority to which to report scams and fraudulent behavior. In the EU every country has specific bodies for this often the national police or consumer protection agency. Reports possible scams and frauds to the relevant bodies even if not personally a victim. You might save someone else. Confident to identify financial situations that are prone to scams or fraud and to take actions to avoid becoming a victim. Confident to identify a situation which is suspicious and may indicate that a scam or fraud has taken place. Knows where to get information about scam and fraud alerts and warnings. Finally be aware of government support. Aware of government support for individuals or households in financial difficulty and under which circumstances this can be obtained. You are not alone.Defense is an active skill. You must keep your radar on.Update your insurance. Check your cover. Be ready for the storm.Protect your data. Lock your digital doors. Do not let the thieves in.And report everything. Stay safe and keep your money secure.See you next time!
