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What is risk transfer in project management?

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Please explain the term risk transfer in project management. Please also give an example of risk transfer where I can clearly understand how it's used and its benefits.
asked 9 years ago by anonymous

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In project management, risk transfer is essentially about throwing the liability (including, but not limited to, associated costs) of the risk on the client. Risk transfers, if any, should be mentioned in the project charter (that is approved by the client).

An example risk transfer would be the following:

Let's assume a project is being executed in a 3rd world country that suffers from constant wars. It is a construction project, so it needs material (concrete, iron, etc...). There is a huge risk that the supplies of these materials will be affected when a war erupts. This will mean that the costs of the materials will increase (as well as the time to get the material). If that risk is transferred to the client in the project charter, then the client (and the company executing the project) will be liable for all the increased costs, and penalties on the company resulting from the project delay will be forfeit.

Quick note: "Risk transfer" is a borrowed term from the financial world.
answered 9 years ago by humblepm (17,390 points)

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