Riskbearing

Riskbearing is the capacity or act of assuming potential financial losses as part of economic activity. A risk bearer stands to lose or gain depending on uncertain future events. In economics and finance, risk bearing is a core function of entrepreneurship and investment, and it is distinct from simply recognizing risk or transferring it to others.

In firms, risk-bearing involves allocating uncertain outcomes to the most capable parties and managing exposure through diversification, hedging, or capital reserves. The size of a company's risk-bearing capacity depends on its capital, liquidity, and governance.

In insurance and financial services, risk bearing is central. Insurers rely on policy premiums, investment income, and reserves to cover expected losses while maintaining solvency; the risk borne is shared among policyholders, insurers, and reinsurers.

Risk-bearing also interacts with market prices: higher risk is typically rewarded with higher expected returns (the risk premium), and investors use diversification to spread risk.

Related concepts include risk management, hedging, capital adequacy, and risk appetite.