Risk sharing is a financial strategy where multiple parties distribute the potential losses or gains associated with a particular investment or project. This approach helps reduce the burden on any single entity, making it easier to manage uncertainties. For example, in a joint venture, companies can pool resources and share both the risks and rewards of a new business endeavor. In insurance, risk sharing occurs when policyholders collectively contribute to a fund that covers losses for individuals who experience unexpected events. This system allows individuals to protect themselves against significant financial setbacks while ensuring that the costs are spread across a larger group, making it more affordable for everyone involved.