Vulnerability to poverty in Malawi is highly associated with risk. Rural households face multiple shocks, most of which threaten their livelihoods and impact negatively on their welfare. This study investigates three inherently interconnected issues: vulnerability to poverty; risk management strategies; and consumption smoothing. The central research issue is on understanding the role of risk in household vulnerability and poverty. Using a two-period panel dataset of 259 households in rural Malawi, the study addresses these objectives: First to identify the determinants of vulnerability in rural Malawi. Second to analyze households' coping mechanisms for different shocks and identify the determinants of these mechanisms. Third, to test for the existence of household consumption smoothing as an insurance mechanism against idiosyncratic shocks.