Risk Sharing

Risk Sharing refers to an arrangement in international trade where the buyer and seller agree through contract terms to jointly bear potential losses, costs, or liabilities arising from transportation, delivery, or market fluctuations, rather than having one party bear them alone. It is commonly used in long-term cooperation, commodity trading, agency distribution, or project collaboration, such as agreeing to share risks from exchange rate fluctuations, raw material price increases, or tariff adjustments proportionally. Use cases include: risk allocation after shipment under FOB or CIF, investment risk sharing in joint ventures, and cost sharing during supply chain disruptions. Note: It is necessary to specify the types of risks shared, proportions, trigger conditions, and dispute resolution methods to avoid disputes caused by vague wording. It differs from 'risk transfer,' where risk is completely transferred from one party to another (e.g., under CIF, risk transfers to the buyer at the port of shipment); it also differs from 'risk avoidance,' which eliminates risk through measures. Risk sharing emphasizes cooperation and fairness and is suitable for building long-term stable trade relationships.