Understanding Risk in the Enterprise: The Key to Transfer Pricing for Today’s Business Models

In the public discussion about transfer pricing, and even in the official guidance, it is evident that different parties may have very different perceptions of risk. This leads to a considerable degree of confusion in the current state of transfer pricing practice. The authors present an analytical framework for understanding risk in the context of applying the arm’s length principle that takes into consideration value creation, roles and responsibilities, and bargaining positions.