Which risk response involves shifting the risk impact to a third party, such as through outsourcing or insurance?

Which risk response involves shifting the risk impact to a third party, such as through outsourcing or insurance?

• A. Risk Avoidance
• B. Risk Mitigation
• C. Risk Transfer
• D. Risk Acceptance

Answer: (C)

Transferring risk to a third party means shifting the responsibility and financial impact of a risk to someone else, typically through outsourcing or purchasing insurance. By outsourcing a task, you rely on another organization to absorb the risk of performance, delays, or failures. By buying insurance, you transfer the potential financial loss to the insurer. The risk isn’t eliminated; it’s ownership of the consequence that moves to another party through a contract or policy. This is different from avoiding the risk (choosing not to undertake the activity at all), mitigating the risk (reducing its probability or impact while you still bear responsibility), or accepting the risk (acknowledging it and doing nothing to change the exposure).

Transferring risk to a third party means shifting the responsibility and financial impact of a risk to someone else, typically through outsourcing or purchasing insurance. By outsourcing a task, you rely on another organization to absorb the risk of performance, delays, or failures. By buying insurance, you transfer the potential financial loss to the insurer. The risk isn’t eliminated; it’s ownership of the consequence that moves to another party through a contract or policy.

This is different from avoiding the risk (choosing not to undertake the activity at all), mitigating the risk (reducing its probability or impact while you still bear responsibility), or accepting the risk (acknowledging it and doing nothing to change the exposure).