RISK RETENTION Meaning and
Definition
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Risk retention is a financial strategy or concept that refers to the decision made by an individual or organization to accept and bear the potential financial consequences or losses associated with a particular risk or hazard. It involves consciously choosing to retain a certain amount of risk instead of transferring it to an insurance company or other parties through means such as purchasing insurance, hedging, or entering into contracts.
In risk management, risk retention can be seen as a deliberate action taken by an individual or organization to maintain control over potential losses or liabilities rather than transferring them to another party. By doing so, the entity accepts the financial consequences that may arise from the occurrence of the risk. This decision is typically based on a thorough assessment of the risk involved, as well as the entity's financial capacity and risk appetite.
Risk retention can be employed in various contexts, including personal finance, insurance, and business operations. It is often utilized when the perceived cost or likelihood of a risk event is relatively low or when the entity believes they can more effectively manage and financially absorb the potential losses compared to the costs of transferring the risk to an external party. However, risk retention also exposes the entity to the full extent of the risk and its associated financial impact, requiring careful evaluation and consideration of potential consequences.
Common Misspellings for RISK RETENTION
- eisk retention
- disk retention
- fisk retention
- tisk retention
- 5isk retention
- 4isk retention
- rusk retention
- rjsk retention
- rksk retention
- rosk retention
- r9sk retention
- r8sk retention
- riak retention
- rizk retention
- rixk retention
- ridk retention
- riek retention
- riwk retention
- risj retention
- rism retention
Etymology of RISK RETENTION
The word "risk" comes from the mid-17th century French word "risque" or the Italian word "rischio", which both meant "danger". These origins are further traced back to the Arabic word "rizq", meaning "that which is allotted to someone".
The word "retention" originates from the Latin word "retentio", which means "keeping back" or "holding on to". It is formed from the verb "retinere", which translates to "to hold back" or "to keep".
When combined, the phrase "risk retention" implies the act of keeping or holding on to risk.
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