In risk management, transfer as a risk treatment option means what?

• A. Shifting risk to another party, typically through insurance or contracts.
• B. Eliminating risk entirely.
• C. Creating new risks.
• D. Ignoring risk.

Answer: (A)

Transferring risk means shifting the potential loss to another party, rather than bearing it yourself. This is typically done by using insurance or contractual arrangements that make someone else responsible for bearing the costs if a bad event occurs. Insurance pays out to cover the loss, turning a potentially unknown financial impact into a known premium and a defined claimant path. Contracts can require suppliers, contractors, or partners to accept liability or provide indemnities, further moving the exposure away from your organization. The goal is to allocate the financial consequences to parties better positioned to manage that risk, rather than trying to eliminate the risk itself, create new risks, or ignore it.