It takes care of the riskiness embedded in each project. It is based on the rating we given for each project. In the pricing of traditional insurance, similar factoring exists called underwriting tier, which is applied to the base premium rate. Without the Risk Adjustment Factor, premiums of 2 projects would be identical if their capital demand and supply are the same, which is unsatisfactory since the difference of riskiness in the 2 De-Fi may not be equal. By multiplying the risk factor, we are basically evaluating the risk by capping the premium rate.