Which of the following best describes risk transference?

Risk transference refers to the strategy of shifting the impact of a risk to a third party. This is often done through mechanisms such as outsourcing, insurance, or contractual agreements. By transferring the risk, an organization can limit its exposure and ensure that another party is responsible for managing the potential negative effects of that risk. This approach allows the organization to focus on its core activities while delegating the management of risks to those who may be more equipped to handle them.

In contrast, ignoring the risk and continuing with the project does not mitigate the risk but rather leaves the organization vulnerable. Reducing the likelihood of a risk occurring involves risk mitigation strategies, which are different from transference. Enhancing potential opportunities from the risk focuses on leveraging risk for potential gain rather than transferring responsibility, which is not aligned with the principle of risk transference. Thus, the definition that best encapsulates risk transference is the one that involves shifting the impact to another party.