Passing risk to another party is known as ____ the risk?

Passing risk to another party is known as transferring the risk. This process involves reallocating the potential consequences of a risk to another entity, often through contracts or insurance. In project management, this strategy allows the original party to mitigate potential losses or liabilities that could arise from certain risks.

Transferring risk is commonly employed in situations where an organization identifies a risk that it does not have the capacity or desire to manage internally. For example, a company might take out an insurance policy to handle potential damages from a natural disaster. In this case, the insurer assumes the financial risk, allowing the company to focus on its core activities without the encumbrance of handling that specific risk.

This strategy is advantageous as it can provide both financial protection and peace of mind, knowing that there is a plan in place for potential adverse events. It contrasts with other strategies like avoiding, retaining, or mitigating risks, which involve different levels of engagement with the identified risks.