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

Question

Options

• AWarranties
• BPerformance bonds
• CUse of insurance
• DLife cycle costing

• A
  3% (1)
• B
  6% (2)
• D
  91% (31)

Explanation

D (Life cycle costing) is the correct answer because it is a cost estimation technique used to evaluate the total cost of ownership of a project or asset over its entire lifespan - it has nothing to do with shifting risk to another party.

A, B, and C are all genuine risk transference tools: Warranties transfer the risk of defects or failures to the manufacturer or vendor; performance bonds transfer the risk of contractor non-performance to a surety company that must compensate the project owner; and insurance is the classic transference mechanism, where a premium is paid so an insurer absorbs the financial impact of a specified risk event.

Memory tip: Think of transference as "pay someone else to own the problem." Warranties, bonds, and insurance all involve a fee or premium in exchange for another party bearing the risk. Life cycle costing is about predicting costs, not shifting risk - if it sounds like accounting rather than a contract, it's not transference.

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