“Some risks can be transferred in part from the purchasing organization to another party, so the other party bears the initial consequences if the risk arises. Sharing a risk with another party usually incurs a cost for the organization. A general principle of risk management is that risks should be the responsibility of those best able to control and manage them. Risk assessment, in identifying how risks might arise, can provide the initial guide to which party is best able to manage the risks. ==Risk sharing occurs when contracts are negotiated between an organization and its suppliers or sub-contractors.== Contracts are the primary means of allocating risk between the parties involved in most projects. However, sharing a risk with a contractor or supplier does not transfer it fully, and it may not really eliminate the risk–it just transforms it into a ‘contractor failure’ or ‘contractor performance’ risk. In these circumstances ==it is critical to ensure the contractor has a system in place for managing risk effectively, otherwise the project may end up with additional risks==. In many projects, procurement contracts require sound risk management processes to be developed and implemented by the contractors, sub-contractors or suppliers of products or services, as part of prudential control and oversight procedures. ==This process of allocation is called risk sharing rather than risk transfer because risks are rarely transferred completely or shed entirely==. In many circumstances the contract between the buyer and the supplier is viewed as an explicit mechanism for sharing risk between them, rather than transferring risk from one to another. The risk assessment process, in identifying how risks might arise, can provide the initial guide to which party is best able to manage risks and the most appropriate form of contract. The analysis also identifies the potential consequences, and so may aid in determining a fair price for taking the risks involved.” — Project Risk Management Guidelines: Managing Risk in Large Projects and Complex Procurements by Dale F. Cooper, Stephen Grey, et al. https://a.co/dRqWx77