Which type of risk response involves shifting the impact of a risk to a third party?

The type of risk response that involves shifting the impact of a risk to a third party is transference. This approach is used to pass on the potential consequences of a risk to another entity, often through contracts, insurance, or outsourcing. For example, a company might purchase insurance to cover potential losses from a risk event, thereby transferring the financial impact to the insurance company.

Transference does not eliminate the risk itself; rather, it modifies the way that the risk is handled by ensuring that the burden is carried by someone else. This is particularly effective in scenarios where the potential impact of a risk is too great for the project or organization to absorb on its own.

In contrast, risk acceptance involves recognizing the risk but deciding to proceed without any changes, risk avoidance means altering the project plan to eliminate the risk entirely, and risk mitigation focuses on taking steps to reduce the likelihood or impact of the risk. Each of these strategies serves different purposes in risk management, but transference specifically targets the concept of shifting responsibility to an external party.