---
title: Wrap-Ups – A Closer Look at Financial Risk
description: Financial Risk refers to all the financial implications associated with a Wrap-Up. In this post, we will take a closer look at financial risk.
image: https://blog.tsibinc.com/hubfs/Wrap-Ups-A-Closer-Look-at-Financial-Risk.jpg
---
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{id=37923349415, name=Wrap-Ups, slug=wrap-ups}
# Knowledge Corner
November 23, 2020
## Wrap-Ups – A Closer Look at Financial Risk
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You have decided to utilize a Controlled Insurance Program (CIP, also known as a Wrap-Up) for your construction project. That’s great! Now deciding who will be the Sponsor for your project is crucial for its overall success.
The Sponsor is responsible for the [Wrap-Up’s key elements](https://blog.tsibinc.com/the-4-components-of-a-ccip-and-ocip), like Program Design, Financial Risk, Administration, and Claims Management. With an OCIP, the Owner is the Sponsor for the project. With a CCIP, the Contractor is the Sponsor for the Project.
Let’s examine one of the key elements—Financial Risk—a little further. Financial Risk refers to all the financial implications associated with a Wrap-Up. This includes:
**Savings/Losses**
The safer a project is, the less insurance claims associated with it. Fewer claims to settle means more monetary savings for the Sponsor. More claims means additional monetary losses for the Sponsor.
[**Collateral**](https://www.irmi.com/term/insurance-definitions/collateral)
Assets provided as security to ensure satisfaction of a future liability are known as collateral. Often, collateral is required in an effort to minimize credit risk. For a Wrap-Up, the program’s maximum loss fund may require upfront payment or collateral. The Sponsor would be responsible to supply this collateral.
**Time Commitment**
A project’s actual savings/losses will be unknown until all claims have been settled. This can take up to 10 years after the project is completed. As a result, whoever is the Sponsor (Contractor or Owner) must wait to close their financial books until such time. It becomes a long-term financial commitment for the Sponsor.
The Sponsor has a lot of responsibility when it comes to Financial Risk. Whichever you decide to implement, an [OCIP or a CCIP](https://tsibinc.com/wrap-ups/ocip-ccip/), will ultimately determine who manages the overall program and the Financial Risk. To learn the specific differences between an OCIP and CCIP, check out our video below:
Let TSIB help you determine the right fit for your next construction project. [Contact us today](https://tsibinc.com/contact-us/) to speak with one of our Wrap-Up Specialists! TSIB is a full-service insurance brokerage with a team of Risk Advisors located throughout the country with offices in NJ, CT, TX, and CA.
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image credit: stockbroker/shutterstock.com
Topics: [CCIP](https://blog.tsibinc.com/topic/ccip), [OCIP](https://blog.tsibinc.com/topic/ocip), [Wrap-Ups](https://blog.tsibinc.com/topic/wrap-ups)
Written by [The TSIB Team](https://blog.tsibinc.com/author/the-tsib-team)
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