By Andrew Wong     3rd Nov. 2004

Different Risk Management Approach by Employee and 
In this article, I am sharing with you two types of risks associated with two financial gain expectations. It also illustrates distinctly the key differences between Employee's Paradigm and Investor's Paradigm.

It is hoped that, after understanding the differences, readers are able to make their own intelligent choices in moving on with their life.

Employee Paradigm

It is natural for an employee aspires to have higher salary. Higher salary or financial gain not only helps to meet the financial needs and better lifestyle of the person and family, it may also reflect higher capability of the employee in taking up greater scope of work or responsibilities.

An opportunity may arise whereby there is a significant financial gain (e.g. higher salary, or allowances or both) but with higher occupational hazards, or working in a foreign country having security risks, or harsh living condition for the employee and the family. 

No doubt, each person has his or her own tolerance level with respect to the above mentioned risks. Rationally and emotionally, he or she will make decisions based on certain criteria, making the necessary evaluation and assessment.

I would like to focus only on the economic consideration – that is, the expected financial gain as the key attraction and driver to weigh against other factors. The context under discussion is the case of an “adverse” environment or condition of working or living, to the degree of causing discomfort or anxiety to the parties concerned.

The general rationale is “ suffer a few years for that extra significant financial gain”. And this becomes the governing principle or reason to make the decision to take up a new job or transferred position.

Calculation and Quantification

Person concerned having to make a decision whether or not to take up the new job or transferred job, will no doubt make a calculation of the expected financial gain over a period of time. Let’s say, it is an extra $ X over 3 years period.

Now we could do some quantification of such decision : $ X over 3 years with the current perceived risks, hence anxiety on safety, security, discomfort, children education etc. etc.

More Insightful Questions to Ponder

It is useful to take a more holistic approach to the decision making, besides the above mentioned rationale – suffer first, sacrifice some aspects of life for a financial gain.

Often, people behavior is driven by sense of financial insecurity or achieving greater wealth creation. It is certainly not illogical to think that way, but the question is : “Is this the best strategy?”

Start from where we left off on “Extra financial gain of $ X over, say 3 years”, we pose ourselves the following questions:
  • How significance is this $ X? What impact when it is achieved?
  • What will happen after $X and 3 years time? What extra betterment, better life quality for self and family?
  • Are there other ways / strategies to achieve the quantum of the financial gain with less effort and sacrifice?

Investor’s Paradigm

I wish to bring to the awareness of you the readers that there are high possibilities to realize the financial gain through strategic, disciplined and skillful investment approach. This is based on many cases that I work on with proven results.

Employee paradigm is to use “blood and sweat” to achieve the financial gain.

Investor paradigm is to use money (own and / or borrowed) to achieve the financial gain.

(Remember, we are talking of a case whereby for the new job or posting, there is only the financial gain, no other secondary gain e.g. it is not like going to an advanced country with high quality of life etc. ).

On the notion about investment as an approach, the reaction is that it is risky.

Types of Risk associated with intended Financial Gain

We will make a distinction between the two different types of risk associated with the intended financial gain.

In the case of taking up a new job or posting in a country perceived as unsafe and with security problems, the risk is not at all within the control of the person. Getting caught in situations with a high frequency of theft, robbery or assaults, or racial discrimination, terrorists attack etc. is an issue of fate or chance, if one cannot escape easily. 

Then the Risk is dependent on circumstances around and chance. Even with high awareness and careful monitoring of developing events that can lead to danger, there could be difficulties in escape route.

But in the case of investment risk, it is entirely different.

First of all, investment worse risk in poor performance only results in financial loss, not bodily injury or death due to violence. 

Secondly, investment risk is entirely under the control of the investor. This statement will certainly sound alien to most people due to lack of awareness and low financial literacy. Most people do not know that investment risk is a function of one’s knowledge and skills or competencies in understanding the market forces and take protective and defensive positions.

Certain types of investment instrument give flexibility in escape route i.e. high liquidity when one is competent enough to know when and how to execute the “escape”.

Many still get stuck with the old belief that investment is risky and take up risk in going to work in other places where there could be risks and hazard to life or physical well being of himself or herself and family.

(Investment knowledge and skills is a big subject in my column / website. This article merely introduces this unfamiliar concept and idea, that sound investment can also be a mean to achieve one’s expected financial gain.)

Financial Planning

So far we have been discussing only financial gain, the extra that one can earn or make by going to difficult places to earn a living. But the larger picture is really the Financial Planning – financial needs, lifestyle, etc throughout your life-span. 

It is from here one understands the overall financial needs and from there design strategies to achieve the financial goals. 

Supposing the extra financial gain after 3 y ears is still insufficient to meet the financial goals of the planned life-span, should one be working in such difficult places for many years to come?

If the extra financial gain is much more than the planned financial needs, then is the suffering and anxiety worth the effort?

If after studying sound investment strategies with calculation showing meeting the financial goals adequately, should you still choose to take up the risk to work in a place with anxiety and discomfort?

So, the focus is Financial and Investment Literacy as another option to help realizing one’s financial needs for now and the future.

If the above makes sense, you are then welcome to the Community of Investment Knowledge seekers, and contact this QuaSyLaTic.


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