A project team identifies a risk and decides to purchase insurance to limit the financial impact. This is an example of which risk response strategy?

Question

Project Management (PMP) — Medium

A project team identifies a risk and decides to purchase insurance to limit the financial impact. This is an example of which risk response strategy?

Accepted Answer

Purchasing insurance to limit financial impact is a direct example of transferring risk. This strategy involves shifting the risk to another party, in this case, the insurance provider. The team is not avoiding or mitigating the risk, but rather transferring its financial consequences.