Certified Governance Risk and Compliance (CGRC) Practice Exam 2026 – All-in-One Guide to Master Your Certification!

Transference in risk management refers to the practice of shifting the responsibility for a risk from one party to another. This often involves transferring the financial implications or the burden of risk to a third party, such as through insurance policies, outsourcing agreements, or contractual arrangements. By doing so, the original entity can reduce its own exposure to financial loss or operational impact associated with specific risks.

When organizations transfer risk, they effectively allocate certain risks to entities that may be better equipped to handle them, thereby potentially improving their overall risk management profile. For example, purchasing insurance is a common form of risk transference, where the insurer assumes the financial risk associated with certain events, allowing the insured party to limit their potential losses.

The other options describe different risk management strategies. Accepting risk involves acknowledging it and making no changes, while mitigating risk focuses on reducing the severity or likelihood of the risk through proactive measures. Ignoring the risk altogether does not involve any action and is not considered a strategic approach in effective risk management. By understanding these distinctions, one can effectively employ various strategies based on the specific context of the risks faced.