Recognise the Three Main Risks to Money in Wealth Management
Amidst the dynamics of economic uncertainty, financial management has become an essential skill for individuals, particularly for those with significant assets who entrust banks with their stewardship. This is because money itself carries risks if not managed properly.
“People need wealth management because, in general, simply having money is not enough; money carries risks. It is not just humans who face risks; money does too,” said Stephanie Kristanto, Premier Banking Segment Head at PT Bank OCBC Indonesia, during the Media Chit Chat #1 event in Jakarta on Tuesday.
Stephanie explained that there are at least three main risks to money. The first is inflation risk. In an economy, inflation, or the rising price of goods, automatically erodes public purchasing power.
“This is why we want our money to work while we sleep. Because while we are sleeping and doing nothing, the value of money is being eroded. Inflation is a sleeping enemy. Therefore, if we do nothing, instead of making money harder to obtain, the money actually decreases over time,” she explained.
Therefore, she noted, inflation risk can be addressed through methods such as investing. Investment instruments are diverse, including mutual funds and stocks. By utilising investment differentiation, money is expected to become more resilient against inflation.
“Once you have invested, you are faced with the next risk, which is volatility risk. Because every product certainly carries risk,” she added.
Stephanie stated that risk is inherent in every investment product. For instance, in the capital market, during the first half of 2026, a deep correction was observed in the Indonesia Composite Index (IHSG), influenced by global geo-economic and geopolitical dynamics, as well as domestic policies.
“How do we manage this risk? Because every investment instrument and wealth management product has different risk management approaches. This can be mitigated through asset allocation or diversification,” she explained.
The next risk is individual risk, which is the most fundamental, according to Stephanie. This relates to human risk, such as the possibility of falling ill or death.
“It is futile to have money if we forget the risks that can happen to ourselves. We could fall ill, live a shorter life, or live too long,” she said.
“Therefore, these three elements are the risks that need to be captured in the wealth management process. These three risks drive every need within the three life cycles of wealth management,” she emphasised.
There are three stages in the wealth management cycle. First is the accumulation stage, an initial phase focused on building a foundation and developing assets. The primary focus is building wealth through active income, regular investments, and utilising compound interest. The strategy involves starting an investment portfolio and allocating funds for retirement as early as possible.
Second is the preservation or transition stage. This stage focuses on protecting accumulated assets from market volatility and ensuring a secure cash flow. Strategies include asset diversification, balancing portfolios with lower-risk instruments such as bonds, and securing emergency funds.
Third is the distribution stage. At this stage, the main focus is using assets for retirement income and planning inheritance to ensure wealth is transferred legally and efficiently. Strategies include estate planning, trusts, and philanthropy programmes.