Company A sells a new machine to company B. During the risk assessment, the stakeholders of company A do not want the risk of transporting the machine from their facility. Instead, they want company…

Question

Options

• AAvoid
• BTransfer
• CMitigate
• DAccept

• B
  87% (13)
• C
  7% (1)
• D
  7% (1)

Explanation

Option B (Transfer) is correct because Company A is shifting financial liability and responsibility for the risk to Company B - the defining characteristic of risk transfer. Once the machine leaves Company A's facility, Company B bears any consequences of damage or loss during transport.

• A (Avoid) is wrong because avoidance means eliminating the risky activity entirely - Company A is still selling and shipping the machine, not canceling the deal.
• C (Mitigate) is wrong because mitigation means reducing the probability or impact of a risk (e.g., better packaging), not handing off responsibility to another party.
• D (Accept) is wrong because acceptance means Company A acknowledges the risk and absorbs any resulting loss themselves - the opposite of what's happening here.

Memory tip: Think of risk transfer like insurance - you don't eliminate the risk, you pay (or negotiate) for someone else to own it. Whenever you see "liability shifts to another party," that's Transfer.

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