Shifting risk to another party is known as which risk management technique?

Shifting risk to another party is known as which risk management technique?

• A. Risk Retention
• B. Risk Sharing
• C. Risk Transfer
• D. Risk Reduction

Answer: (C)

Shifting risk to another party is risk transfer. This means making someone else responsible for the financial consequences of a potential loss. In property and casualty practice, you typically transfer risk by purchasing insurance, where the insurer assumes the cost of covered losses in exchange for a premium. Risk transfer also occurs through contracts that require another party to indemnify or assume liability for certain risks, such as a service contract in which the vendor covers damages arising from their work. By contrast, risk retention means you keep the risk yourself and bear any losses; risk sharing distributes risk among several parties but not necessarily with an insurer; risk reduction focuses on lowering the likelihood or severity of a loss rather than moving the financial burden to another party.

Shifting risk to another party is risk transfer. This means making someone else responsible for the financial consequences of a potential loss. In property and casualty practice, you typically transfer risk by purchasing insurance, where the insurer assumes the cost of covered losses in exchange for a premium. Risk transfer also occurs through contracts that require another party to indemnify or assume liability for certain risks, such as a service contract in which the vendor covers damages arising from their work. By contrast, risk retention means you keep the risk yourself and bear any losses; risk sharing distributes risk among several parties but not necessarily with an insurer; risk reduction focuses on lowering the likelihood or severity of a loss rather than moving the financial burden to another party.