CGRC · Question #418
The risk transference is referred to the transfer of risks to a third party, usually for a fee, it creates a contractual-relationship for the third party to manage the risk on behalf of the…
The correct answer is B. Life cycle costing. Life cycle costing is an economic analysis method for evaluating the total cost of a project over its entire lifespan, which is not a strategy for transferring risk to a third party.
Question
The risk transference is referred to the transfer of risks to a third party, usually for a fee, it creates a contractual-relationship for the third party to manage the risk on behalf of the performing organization. Which one of the following is NOT an example of the transference risk response? Response:
Options
- AUse of insurance
- BLife cycle costing
- CWarranties
- DPerformance bonds
How the community answered
(31 responses)- B90% (28)
- C3% (1)
- D6% (2)
Why each option
Life cycle costing is an economic analysis method for evaluating the total cost of a project over its entire lifespan, which is not a strategy for transferring risk to a third party.
The use of insurance is a classic example of risk transference, where the financial burden of certain risks is shifted to an insurance company for a premium.
Life cycle costing (LCC) is a process of systematic economic analysis to identify and sum the costs of an item or system over its entire life. It is a financial management or budgeting technique, not a risk response strategy aimed at transferring risk to another entity.
Warranties transfer the risk of product defects or failures from the buyer to the manufacturer for a specified period.
Performance bonds are a form of guarantee that transfers the risk of a contractor failing to complete a project or meet contractual obligations to a surety company.
Concept tested: Risk response strategies (transference)
Source: https://www.pmi.org/pmbok-guide-standards/foundational/pmbok
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