Which of the following methods of addressing risk is most associated with insurance?

The concept of transference in risk management refers to the strategy of transferring the risk from one party to another. This is commonly achieved through insurance. When an organization purchases insurance, it effectively transfers the financial burden associated with a potential loss (such as damages, theft, or liability) to the insurance company. In this scenario, the organization pays a premium to the insurer, and in exchange, the insurer agrees to cover certain risks as outlined in the policy.

By transferring the risk, the organization mitigates its potential financial impact, as the insurer will provide coverage when an insured event occurs. This method allows businesses to manage specific risks without eliminating them entirely, making it a practical approach for many organizations looking to protect their assets.

In contrast, avoidance means eliminating the risk entirely, acceptance implies consciously deciding to take on the risk without any measures, and mitigation involves reducing the likelihood or impact of the risk but not transferring it. Thus, transference is distinctly tied to insurance practices.