Risk transfer
Risk transfer or sharing allocates specified consequences of a risk to another party through an arrangement such as insurance, a contract or a partnership. Its effectiveness depends on coverage, exclusions, enforceability and the counterparty’s ability to perform. The originating organisation may retain deductibles, uncovered costs, operational disruption, reputational effects or legal responsibilities.
Worked example
A factory insures equipment against specified fire damage. The policy may reimburse covered losses subject to its terms, but management still needs fire prevention, continuity arrangements and assessment of uninsured disruption.
Common mistake
Outsourcing an activity or buying insurance does not transfer every associated risk or remove the organisation’s accountability.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBL | Direct | September 2026–June 2027 |