Risk Transfer Techniques

Risk transfer techniques involve shifting potential financial losses from one party to another, typically through insurance or contractual agreements. For example, a business may purchase insurance to protect against property damage, meaning the insurance company assumes that financial risk. Similarly, contracts can allocate risks between parties, such as subcontractors accepting responsibility for certain damages. These methods help organizations manage uncertainty by reducing their exposure to specific risks, providing financial safety nets, and allowing them to focus on their core activities with greater confidence.