risk-sharing contracts

Risk-sharing contracts are agreements where parties distribute the financial risks involved in a project or service. Instead of one party bearing all the potential losses or gains, the risks are shared proportionally or based on specific terms. This approach aligns incentives, encourages collaboration, and can lead to more efficient outcomes, especially in uncertain situations like healthcare, construction, or technology development. Essentially, risk-sharing contracts foster cooperation by ensuring that all involved parties have a vested interest in the project's success and share both its rewards and potential setbacks.