Risk mitigation refers to measures taken that are expected to affect risk outcomes. Such measures may include measures that reduce the uncertainty or measures that reduce the consequences in the event that the downside impact of risk occurs. Control should not be interpreted as requiring risk mitigation measures to be adopted, since in assessing risks businesses may decide that the uncertainty associated with some risks, including risks that may be fundamental to their core business operations, after being evaluated, should be taken on and faced in order to create and maximise opportunities.
TPG2022 Chapter I paragraph 1.68
Category: D. Guidance for applying the arm’s length principle | Tag: Analysis of risk, Assumption of risk / Risk assumption, Comparability analysis, Control over risk, Delineation, Functional analysis, Risk mitigation
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- TPG2022 Chapter I paragraph 1.71There are many definitions of risk, but in a transfer pricing context it is appropriate to consider risk as the effect of uncertainty on the objectives of the business. In all of a company’s operations, every step taken to exploit opportunities, every time...
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Related Case Law
- Sweden vs Pandox AB, February 2022, Administrative Court, Case No 12512-20, 12520–12523- 20 and 13265-20Pandox AB is the parent company of a hotel group active in northern Europe. Pandox AB’s business concept is to acquire hotel property companies with associated external operators running hotel operations. Pandox AB acquires both individual companies and larger portfolios, both in Sweden...
- Japan vs. “Metal Plating Corp”, February 2020, Tokyo District Court, Case No 535 of Heisei 27 (2008)“Metal Plating Corp” is engaged in manufacturing and selling plating chemicals and had entered into a series of controlled transactions with foreign group companies granting licenses to use intangibles (know-how related to technology and sales) – and provided technical support services by sending...
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- Romania vs Lender A. SA, December 2020, Supreme Court, Case No 6512/2020In this case, A. S.A. had granted interest free loans to an affiliate company – Poiana Ciucas S.A. The tax authorities issued an assessment of non-realised income from loans granted. The tax authorities established that the average interest rates charged for comparable loans...