Projects in Controlled Environments Foundation Practice Test

Answer: D - Transfer of risk involves allowing a third party to take on part of the risk.

Key takeaway: Transferral of a risk means that a third party takes responsibility for some or all of the financial impact. This could be by means of an insurance policy or clauses in the contract. It is an alternative form of the Reduce option which only affects the financial impact of the threat.

Insurance is inherently about transferring risk. By aggregating individual risks into a pool, insurance companies can protect individual people and firms against risk. This is at a cost, of course.