In the risk-prone context of mountainous regions and other remote, rural areas in developing countries,
risk management through diversification of economic activities and income sources is essential
to reduce vulnerability to poverty. The paper presents an analytical framework to assess vulnerability
at the level of households and communities. Focusing on tourism in the Nepal Himalaya, the impact of
non-farm activities on risk and vulnerability is explored. The empirical study confirms that remote
mountain communities are significantly more vulnerable than rural communities in the Nepalese lowlands.
The research results also reveal the vulnerability-reducing impact of non-farm activities, exemplified
here by households’ economic involvement in tourism. By offering additional income and employment
opportunities, tourism increases the risk management capacity of rural households. This
impact is particularly important for households living in remote mountain regions with little scope for
diversification into other non-farm activities. This explains why tourism is a preferred livelihood option
among rural households in the Nepal Himalaya.