Risk Management Tools
Four basic tools exist for escaping from risk or shifting it to someone else:
- incorporation of a limited liability entity (provided the formalities and minimum initial capital are satisfied);
- insurance;
- indemnification; and
- immunity by reason of sovereignty.
- These “Four I’s” form the framework.
In contracting, only insurance and indemnification are within the normal ambit of commerce. Outsourcing lawyers need to develop strategies based on these two keys. Other tools arise out of the very business process being outsourced.
Four basic tools exist for escaping from risk or shifting it to someone else:
- incorporation of a limited liability entity (provided the formalities and minimum initial capital are satisfied);
- insurance;
- indemnification; and
- immunity by reason of sovereignty.