Quick Answer
The answer is Transfer. Purchasing insurance to cover potential losses from a supplier’s bankruptcy shifts the financial impact of that risk to a third party, the insurance company, rather than reducing the probability or eliminating the threat. This is the core of the Transfer risk response strategy: the risk is not mitigated or avoided, but its ownership and consequences are moved to another entity, typically through contracts or insurance policies. On the CompTIA Project+ PK0-005 exam, this scenario tests your ability to distinguish Transfer from other strategies like Mitigate (which reduces impact) or Accept (which budgets for the loss). A common trap is confusing insurance with Mitigate, but remember: insurance does not make the supplier less likely to fail—it only covers the financial blow. For a quick memory tip, think “Transfer = Third party,” as in shifting the burden to an external party like an insurer.
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 leading a construction project. The team identifies a risk that a key supplier may go bankrupt. The project manager decides to purchase insurance to cover potential losses. Which risk response strategy is being used?
Accept
Why wrong: Acceptance is passive or active without transferring.
Avoid
Why wrong: Avoidance would eliminate the risk by choosing a different supplier.
Mitigate
Why wrong: Mitigation reduces probability or impact, not transfer.
Transfer
Insurance transfers the financial risk to the insurer.
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 the supplier's bankruptcy to the insurance company. This is a classic example of the Transfer risk response strategy, where the impact of the risk is shifted to a third party, not eliminated or reduced.
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.
Accept
Why it's wrong here
Acceptance is passive or active without transferring.
Avoid
Why it's wrong here
Avoidance would eliminate the risk by choosing a different supplier.
Mitigate
Why it's wrong here
Mitigation reduces probability or impact, not transfer.
Transfer
Why this is correct
Insurance transfers the financial risk to the insurer.
Related concept
Read the scenario before looking for a memorised answer.
Common exam traps
CompTIA often tests the distinction between Mitigate and Transfer, where candidates mistakenly choose Mitigate because insurance seems to 'reduce' impact, but the key is that Transfer shifts the financial burden to another party, while Mitigate involves internal actions to lower probability or impact.
Detailed technical explanation
In risk management, Transfer typically involves a contractual agreement or financial instrument (like insurance, performance bonds, or warranties) to shift the negative impact of a threat to a third party. It does not eliminate the risk; the project still faces potential delays if the supplier fails, but the financial loss is covered. This is distinct from Avoid, which changes the project scope or schedule to remove the risk entirely.
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 the supplier's bankruptcy to the insurance company. This is a classic example of the Transfer risk response strategy, where the impact of the risk is shifted to a third party, not eliminated or reduced.
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 30, 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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