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Bearing Limit

The amount of cost or uncertainty that a given component can be expected to bear. (Uncertainty here may include risk, surprise, instability or variability.)

Any given party or component has a bearing limit, which defines how much cost and risk it can bear. Above this limit, the party cannot be expected to contain the costs and risks allocated to it, and these may spill over the contractual boundaries to its partners or neighbours. In the worst case, a party unable to bear its costs and risks goes into liquidation, and the remaining costs and risks then have to be picked up by another party.

In some cases, the bearing limit can be determined fairly precisely. This is particularly true in cases that are covered by various forms of indemnity insurance, since the bearing limit can be taken to be equal to the level of insurance cover. In other cases, the bearing limit is itself a matter for negotiation.

Within a hierarchical organization, there is a bearing limit at each level of the management hierarchy. In other words, there is a maximum level of responsibility that can be delegated downwards. Above this limit, the responsibility remains with upper management. (For example, if a trading bank loses half a billion dollars, this cannot be blamed solely on a rogue trader with an authorization limit of 50 million dollars. To pretend otherwise is either foolish or corrupt.)


Within risk management, contingency refers to a specified response to a specified event. (The term has other meanings within project management and systems theory.) 
Veryard Project Papers Three Notions of Contingency


Veryard Project Papers Insurance
Insurance Models




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