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You can use the mitigation strategy if the risk is controllable by your team. Risk Management Techniques — methods for treating risks. Traditional risk management techniques for handling event risks include risk retention, contractual or noninsurance risk transfer, risk control, risk avoidance, and insurance transfer. When you transfer risk you are assigning the burden of risk to someone else, who contractually accepts your risk, usually in exchange for a premium. Risk Transfer – Common Pitfalls Profit Commissions True profit commission does not affect risk transfer. Transfer of Risk — a risk management technique whereby risk of loss is transferred to another party through a contract (e.g., a hold harmless clause) or to a professional risk … Credit risk transfer (CRT) is a key part of our Single-Family and Multifamily business models. Paid if and only if the reinsurer is in a profit position. With some evident benefits for the enterprise, risk transfer remains a decision that needs to be approached strategically. Transfer Risk. Note: It impacts potential profitability of the contract but not risk transfer. Thus, an evaluation is recommended to define and identify risk level, the assay history and complexity, method validation status, experience at both transferring and receiving laboratories, etc. If it is possible to avoid risk, you can select the avoid strategy depending on the circumstances. If employing a third party is a better solution to manage the risk, you can select the transfer strategy. Contrary to risk transfer strategy, risk sharing strategy is applicable to positive risks or opportunities. Through our credit risk transfer transactions, we facilitate the flow of private capital between Fannie Mae's lender customers and a diverse group of investors. This risk transfer accomplishes objectives found in both risk financing (finding a source to pay the cost of a claim) and risk control (developing a means to avoid or lessen the cost of a loss). Based on the outcome of these evaluations, the approach for methods transfer may vary. Risk transfer best practices. A classic example of risk transfer is the purchase of an insurance. Buying insurance is the easiest way to transfer risk. This is not a swing rate. You transfer risk to an insurance company who accepts the financial cost of your risk in exchange for your premium. - organizations use contractual (non insurance) risk transfer to transfer many of the same types of hazard risk that are covered bu insurance (EG two parties may agree that one party will reimburse the other for its loss or that one party will undertake an activity (and absorb the accompanying risk) that the other party normally would perform. Risk Sharing. 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