HKSM

A risk response approach where the project team moves the potential impact of a threat to another party and gives that party responsibility for handling the response.

Key Points

• Shifts both the consequence of the threat and response ownership to a third party.
• Does not remove the risk; it reallocates it, often for a fee or through a contract.
• Common tools include insurance, warranties, performance bonds, and fixed-price contracts.
• Works best when the third party is better equipped to manage the risk; ensure clear contract terms.

Example

A project purchases professional liability insurance and requires a performance bond from a vendor. If defects occur, the insurer or surety pays and manages the claim, not the project team.

PMP Example Question

A project manager buys insurance to cover potential damages from a high-risk activity and requires a performance bond from the contractor. Which risk response strategy is being used?

1. Avoidance
2. Mitigation
3. Transference
4. Acceptance

Correct Answer: C — Transference

Explanation: Insurance and performance bonds move the financial impact and management of the threat to a third party, which is risk transference.