ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The most common method of dealing with pure risk is to transfer it to an insurance company by purchasing an insurance policy. Many instances of pure risk are insurable. For example, an insurance company insures a policyholder’s automobile against theft. If the car is stolen, the insurance company has to bear a loss.

Detailed explanation-2: -The main financial risk management strategies include risk avoidance, risk reduction, risk transfer, and risk retention.

Detailed explanation-3: -Risk transfer refers to a risk management technique in which risk is transferred to a third party. In other words, risk transfer involves one party assuming the liabilities of another party. Purchasing insurance is a common example of transferring risk from an individual or entity to an insurance company.

Detailed explanation-4: -Prioritize. Buy Insurance. Limit Liability. Implement a Quality Assurance Program. Limit High-Risk Customers. Control Growth. Appoint a Risk Management Team.