What is the primary purpose of risk transference?

The primary purpose of risk transference is to take the residual risk and transfer it to an insurance company. This concept is part of risk management strategies in which an organization seeks to manage its risk exposure effectively. By transferring risk, typically through insurance policies or contractual agreements, an organization can protect itself from potential financial losses that could arise from specific risks.

This approach allows the organization to maintain focus on its core operations while mitigating the financial burden that could result from unforeseen events or incidents. Transferring risk does not eliminate the risk itself; rather, it ensures that if the risk materializes, the financial impact is borne by another party, such as an insurance provider, rather than the organization directly.

Other options, like eliminating all risk, increasing risk exposure, or ignoring risks, do not reflect the essence of risk transference, which is about strategically managing risk rather than dismissing or amplifying it.