riskallocation
Risk allocation is the process of distributing risk among stakeholders, assets, or contract parties in order to manage uncertainty and control expected costs. The core idea is to assign a risk to the agent best able to influence, absorb, or mitigate it, while balancing incentives and expenditures. Effective risk allocation seeks to reduce overall expected losses, align incentives with responsible behavior, and avoid moral hazard.
In finance and portfolio management, risk allocation often refers to distributing total portfolio risk across underlying
In contracts and project management, risk allocation is achieved through clauses that specify who bears specific
Considerations in risk allocation include information asymmetry, incentives for risk-taking, legal considerations, and the cost of