The Idea behind risk pooling is to redesign the supply chain, the production process or the product to either reduce the uncertainty the firm faces or to hedge uncertainty so that the firm is in the better position to mitigate the consequence of uncertainty.
Ex: Cheaper transportation cost if sent in large no.
Product Benefit from complexity of design due to Risk Pooling.
Risk pooling plays an important role in the insurance industry. It is about pooling similar risks together, such that the resulting pool is more stable.
The process of combining the risks facing individuals into larger groups. This process can be used effectively to transfer individual risks to the entire group. This makes it possible to calculated the risk for the group. Risk pooling is the standard technique that enables the provision of insurance services.