PMI-RMP · Question #139
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 C. Life cycle costing. Life cycle costing is a cost management and procurement evaluation technique, not a risk transference strategy - it does not involve shifting risk responsibility 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?
Options
- AUse of insurance
- BWarranties
- CLife cycle costing
- DPerformance bonds
How the community answered
(47 responses)- A2% (1)
- B6% (3)
- C89% (42)
- D2% (1)
Why each option
Life cycle costing is a cost management and procurement evaluation technique, not a risk transference strategy - it does not involve shifting risk responsibility to a third party.
Insurance is a canonical example of risk transference - the project pays a premium to shift the financial consequences of a specified risk event to the insurer.
Warranties contractually transfer the risk of defects or failures from the buyer to the seller or manufacturer for a defined period, making the seller financially responsible for that risk.
Life cycle costing is an analytical approach used to evaluate the total cost of ownership of an asset or product across its entire useful life span, applied in procurement and financial planning decisions. It contains no mechanism for contractually transferring risk exposure or financial consequences to a third party, which is the defining feature of transference.
Performance bonds are financial guarantees issued by a surety company that transfer the risk of contractor non-performance to the bonding company, protecting the project owner.
Concept tested: Risk transference strategies and examples
Source: https://www.pmi.org/pmbok-guide-standards/foundational/pmbok
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