business economics Business economics is a field in applied economics which uses economic theory and quantitative methods to analyze business enterprises and the factors contributing to the diversity of organizational structures and the relationships of firms with ...

, risk financing is concerned with providing funds to cover the financial effect of unexpected losses experienced by a firm. Traditional forms of finance include risk transfer, funded retention by way of reserves (often called

self-insurance Self-insurance is a situation in which a person or business that is liable for some risk does not take out any third-party insurance, but rather chooses to bear the risk itself. In the United States the concept applies especially to self-funded hea ...

) and

risk pool A “Risk pool” is a form of risk management that is mostly practiced by insurance companies, which come together to form a pool to provide protection to insurance companies against catastrophic risks such as floods or earthquakes. The term is als ...

ing. Alternative risk finance is the use of products and solutions which have grown out of the convergence of the banking and insurance industry. They include captive insurance companies and catastrophic bonds, and finite risk products such loss portfolio transfers and adverse development covers. Professor Lawrence A. Cunningham of George Washington University suggests adapting cat bonds to the risks that large auditing firms face in cases asserting massive securities law damages.http://portal.law.gwu.edu/Bibliography/Bibliography.asp?uid=12154

References

Financial risk management {{finance-stub