Which term describes the act of transferring risk to a willing third party, such as outsourcing operations?

• A. Risk Acceptance
• B. Risk Transference
• C. Risk Avoidance
• D. Risk Limitation

Answer: (B)

Transferring risk to a willing third party means shifting potential losses or liabilities to someone else, typically through outsourcing, service contracts, or insurance. When you outsource operations, the vendor agrees to handle the services and to bear certain risks if something goes wrong. This reduces your organization’s exposure because the financial and operational impact is borne by the party better equipped to manage it, while you still maintain overall governance and oversight.

This differs from accepting the risk, where you acknowledge it and do nothing to change it; from avoiding the risk, where you stop the activity altogether; and from limiting (mitigating) the risk, where you implement controls to reduce likelihood or impact without moving the risk to another party.