Managing Risk with Contractual Risk Transfer


The goal of contractual risk transfer is to protect your interests by managing the risks your business faces and not taking on any unnecessary risks. Contractual risk transfer is a legally binding way to transfer risk to the party that may be in the best position to control the risk related to the service provided. This occurs when one party agrees to take responsibility for liabilities and related financial costs for their services or products on behalf of or for the benefit of the other party. 

In simple terms, contractual risk transfer outlines each party’s responsibilities before the commencement of activities described in the contract. This is typically achieved with the following components:



Written Contract

Agreement between involved parties that defines roles, and responsibilities (including vendors, sub-contractors, service providers, etc.) and defines the scope of work, payment, acceptance, etc.

Indemnification Clauses

Statement(s) in the contract that defines compensation of a party for harm/loss occurring in connection with the other party’s action or failure to act with the intent to shift liability away from one party and onto the indemnifying party.  

Insurance Specifications

Provide details of the required insurance coverage that may be required of either party.

Certificate of Insurance

A form confirming appropriate insurance coverage is provided (coverage, limits, and other specifications) that is obtained before the commencement of work. This may require updates with new or revised coverages.

Additional Insured Endorsement


Modification to the insurance policy that protects the additional insured under the named insured’s policy.  

Record Retention

All contract-related documentation that may be relevant to a claim. 

Please note it is advisable to consult with appropriate legal counsel to determine appropriate contract language as well as record retention periods and related items described above.

When you partner with Innovise, our Risk Control team will know your operations and advise you on these details.

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