What Is Risk Transfer and How Does It Use Insurance?

Which Risk Response Strategy Shifts Liability to Third Parties?

Learn about Risk Transfer in project management: shifting liability to a third party (like an insurance provider) to protect your project from financial or legal impact.

Question

A project team identifies a risk and decides to transfer it through insurance. This is an example of:

A. Transfer
B. Acceptance
C. Avoidance

Answer

A. Transfer

Explanation

This is an example of Risk Transfer, which involves shifting the financial or legal liability of the risk to a third party (often an insurance company or a vendor/contractor) rather than eliminating the risk itself. Acceptance means acknowledging the risk without taking action, and Avoidance involves changing the project plan to eliminate the risk entirely (like choosing a different technology or vendor). No sources were available to cite.