Definition of "Risk financing"

Utilization of source (s) of funds to pay for losses. Source (s) of funds can be classified as:

  1. internal a RETENTION program is established to use funds from within the organization to pay for losses.
  2. external a transfer program (generally through the purchase of INSURANCE) is established to use funds from without the organization to pay for losses.
Usually, a RISK MANAGEMENT program combines retention and transfer to form a comprehensive program for loss protection.
 

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