Personal Financial Risk Management Practices among Households in Riyadh, Saudi Arabia

Abstract

This study explores personal financial risk management practices (PFRMP) among households in Riyadh, Saudi Arabia. Existing financial risk management literature tends to focus more on institution-based financial risk management than household financial risk management. Here we adapt the institutional-based models to a household context. In this framework, the degree to which a household undertakes financial risk management practice is indicated by whether action is stated to have been taken to mitigate against financial risk. PFRMP is modelled as based on the householder’s knowledge of financial risk management, level of financial risk assessed, degree of concern, and personal financial risk control and monitoring. In addition, the relationships between PFRMP and socioeconomic factors of households were investigated using probit analysis. The results show a statistically significant relationship between PFRMP and worry or concern about risk exposures, long-term financial goals, and socioeconomic variables including nationality, income level, and employment status. The results can be used to inform policies aimed at guiding households towards more successful financial risk management practices.