In risk management, which option best describes 'transfer the risk'?

In risk management, which option best describes 'transfer the risk'?

• A. Transfer the risk
• B. Accept the risk
• C. Avoid the risk
• D. Mitigate

Answer: (A)

Transferring the risk means shifting the financial consequences to another party, typically through contract terms or insurance. This approach doesn’t remove the risk itself; it changes who would bear the cost if the risk materializes. For example, buying builder’s risk or general liability insurance, or including indemnity clauses that pass liability to a subcontractor, places the potential losses on the insurer or another party rather than on the project team. The other risk responses are different: accepting the risk means you bear it yourself; avoiding the risk means changing the plan to eliminate it; mitigating means reducing the probability or impact while still retaining some exposure.

Transferring the risk means shifting the financial consequences to another party, typically through contract terms or insurance. This approach doesn’t remove the risk itself; it changes who would bear the cost if the risk materializes. For example, buying builder’s risk or general liability insurance, or including indemnity clauses that pass liability to a subcontractor, places the potential losses on the insurer or another party rather than on the project team. The other risk responses are different: accepting the risk means you bear it yourself; avoiding the risk means changing the plan to eliminate it; mitigating means reducing the probability or impact while still retaining some exposure.