True Ltd is engaged in the business of manufacturing of garments and has its office in New Delhi. The company is operating from rented premises. Management of the company decided to have its own building/premises conside

Risk transfer is another technique for handling risk. Risks can be transferred by several methods. Some of the methods are: (i) Transfer of Risk by Contracts; (ii) Hedging Price Risks; and (iii) Conversion to Public Limited Company. In the given case, Transfer of Risk by Contract can be suggested. Unwanted risks can be transferred by contracts. For example, the risk of a defective television or stereo set can be transferred to the retailer by purchasing a service contract, which makes the retailer responsible for all repairs after the warranty expires. The risk of a substantial increase in rent can be transferred to the landlord by a long-term lease. The risk of a substantial price increase in construction costs can be transferred to the builder by having a firm price in the contract rather than a cost-plus contract.