Quick Answer
The answer is Transfer, because purchasing insurance shifts the financial burden of a potential loss to a third party, which is the core definition of a risk transfer strategy. In project management, transfer does not eliminate the risk itself; it simply moves the ownership and impact of the risk to an insurer or another entity, making it distinct from mitigation, which reduces probability or impact through direct action. On the CompTIA Project+ PK0-005 exam, this concept tests your ability to differentiate risk response strategies, often using insurance as a classic example of transfer, while a common trap is confusing it with mitigate since both address high-probability, high-impact risks. Remember the memory tip: “Transfer = Third-party check,” meaning you write a check to an insurer to handle the financial fallout, not to fix the problem yourself.
This PK0-005 practice question tests your understanding of project management concepts. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A project manager is conducting a risk assessment and identifies a risk with a high probability and high impact. The team decides to purchase insurance to cover potential losses. This is an example of which risk response strategy?
Mitigate
Why wrong: Mitigation would reduce the probability or impact, not transfer.
Transfer
Insurance transfers the financial consequence to the insurer.
Accept
Why wrong: Acceptance means acknowledging the risk without proactive transfer.
Avoid
Why wrong: Avoidance would change the project plan to eliminate the risk.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Transfer
Purchasing insurance transfers the financial risk of a potential loss to a third party (the insurer). This is the defining characteristic of the Transfer risk response strategy, where the ownership and impact of the risk are shifted, but the risk itself is not eliminated. In project management, this is distinct from Mitigate, which reduces probability or impact through direct action.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
Mitigate
Why it's wrong here
Mitigation would reduce the probability or impact, not transfer.
Transfer
Why this is correct
Insurance transfers the financial consequence to the insurer.
Related concept
Read the scenario before looking for a memorised answer.
Accept
Why it's wrong here
Acceptance means acknowledging the risk without proactive transfer.
Avoid
Why it's wrong here
Avoidance would change the project plan to eliminate the risk.
Common exam traps
The trap here is confusing Transfer with Mitigate, as candidates often think paying for insurance reduces the risk, but it only shifts the financial consequence, not the likelihood or inherent threat.
Detailed technical explanation
Risk Transfer in project management often involves contractual agreements, such as insurance policies, warranties, or fixed-price contracts, where the financial burden of a risk event is passed to another entity. The risk itself (e.g., a data breach) still exists, but the financial impact is covered by the insurer. This is a common strategy for risks with high probability and high impact where mitigation costs exceed insurance premiums.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
A small business has 20 workstations on the 192.168.1.0/24 network and one public IP from its ISP. The router uses PAT (NAT overload) so all 20 devices share one public address using different source ports. NAT questions test whether you understand the four address terms and which direction each translation applies.
What to study next
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FAQ
Project Management Concepts — This question tests Project Management Concepts — Read the scenario before looking for a memorised answer..
The correct answer is: Transfer — Purchasing insurance transfers the financial risk of a potential loss to a third party (the insurer). This is the defining characteristic of the Transfer risk response strategy, where the ownership and impact of the risk are shifted, but the risk itself is not eliminated. In project management, this is distinct from Mitigate, which reduces probability or impact through direct action.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Read the scenario before looking for a memorised answer.
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Last reviewed: Jun 24, 2026
This PK0-005 practice question is part of Courseiva's free CompTIA certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the PK0-005 exam.
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