A project manager is overseeing a project to launch a new satellite. While the satellite is being developed internally, a required piece to launch the system is provided by an external partner…

Insurance transfers only the financial consequences of failure to a third party but does nothing to reduce the high failure rate itself, leaving the project exposed to schedule and technical impact.

Risk avoidance is appropriate when a risk cannot otherwise be reduced, but it is not justified here because mitigation options exist and building the component internally may introduce new risks, timelines, and costs.

Risk acceptance is appropriate for low-probability or low-impact risks; a high failure rate on a required critical component represents a significant threat that warrants an active response rather than passive acceptance.

Risk mitigation involves taking proactive steps to reduce the probability or impact of a risk event before it occurs. Requiring quality checkpoints on the external partner's work targets the root cause - high failure rate - by catching defects early in the production process, reducing the likelihood that a failed component reaches the launch stage and jeopardizes the project.