The East Asian and Pacific region hasachieved tremendous progress in poverty reduction in recentyears. However, further progress in poverty reduction may beundermined by the high levels of vulnerability in manycountries across the region. The term vulnerability isviewed from an economic context, where it is conceived asthe likelihood of suffering from future deteriorations instandard of living which may result in a state of poverty,or inability to meet basic needs. Therefore, vulnerabilityis stated as an ex-ante measure of well-being, reflectingnot so much how well off a household (or an individual)currently is, but what its future prospects are. In thinkingabout poverty and vulnerability, it is important to realizethat there are two groups of households: a) those who arevulnerable to transitory poverty if exposed to adverseshocks; and b) those who are structurally or chronicallypoor-many of those households have been affected by shocksin the past, and have limited long-term income generatingcapacity. To better protect household from shocks one mustalso better understand how households face and manage risks.