Strategic Risk Financing

Definition - What does Strategic Risk Financing mean?

Strategic risk financing is the practice of reviewing and assessing a situation to determine a plan to cover financial risks. The goal is to develop a strategy to have enough protection while still being cost-effective. Often, a strategic risk financing decision comes down to whether or not it makes sense to buy insurance, what types of insurance to consider, how much coverage is needed, and other related details.

Insuranceopedia explains Strategic Risk Financing

Deciding whether to buy insurance can be a crucial financial decision. While insurance does offer protection against a risk, it also means paying insurance premiums. If a person or company has the resources to cover a loss with their own resources, they may find it makes more sense to self-insure and avoid paying extra fees to an insurance company. On the other hand, they need to make sure they have enough money saved up to cover a loss; otherwise, the loss could leave them in dire financial circumstances.

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