Family as a Risk Management Mechanism

Today’s advanced societies provide access to a diverse set of risk management tools. These include unemployment insurance for those who lose their source of income, auto and home insurance in the event of accidents, as well as various risk management tools for dealing with risks in financial markets. In addition to government-funded social support programs, there are also many charitable organizations that make food and or clothing available to the needy. Multi-billion dollar industries exist to deal with risk in its many forms. These include insurance, investment management, banking, radar, weather forecasting, and legal services. Consultants of various sorts are available to help clients identify, quantify, and deal with risks.

But where did people turn to before all these constructs and developments came into being? For that matter, in this day and age there are billions of people in less developed nations who lack the benefits of our sophisticated risk mitigation industries. Where did our ancestors and where do the less privileged of today’s societies turn for risk mitigation? The answer is summed up in one word: family. Before insurance companies, banks, and social systems, there was the family unit: generations of people linked by blood. They lived together, worked together, suffered together, and survived together.

There are those who argue that the developments we’re so proud of are to blame for the collapse of the family unit as we used to know it. In recent decades risks have been transformed in such a way that a young person can easily take flight to a destination thousands of miles away, where her physical needs are ensured by reasonably priced insurance. Her new home can be similarly protected, as well as her income stream, should it be interrupted due to illness or injury. Not that long ago such protections were non-existent. To stray any distance from the family home meant being very much alone, unprotected. Delays in communication and long periods required for traveling any distance meant that help, even if willing, was too far away. The dependence on family kept relatives very close to each other, physically, emotionally, as well as spiritually. As human societies evolved, however, the dependence became less a necessity, and over time, many viewed it as a burden. The morality and sense of loyalty that was so much the fabric of human interactions eroded and as the argument goes, this gave rise to or at least encouraged today’s widespread vices, moral and criminal.

On the other hand, advances in risk management have led to amazing freedoms, including labor mobility, expanded entrepreneurialism, and more efficient application of capital. Furthermore, the importance of blood has not disappeared entirely. Many families remain close in spirit even if not in physical proximity. Even those who’ve strayed from the family way find themselves drawn back to the warmth and familiarity of family. Even the most independent of people tend to gravitate back to family when they are in trouble. In most cases blood relatives still feel some instinctive sense of responsibility, however grudging at times.

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