What does it mean to 'transfer the risk'?

Transferring the risk refers to the process of shifting the potential consequences of a risk to another party that is better equipped to handle it. This strategy is often used in risk management to mitigate potential losses or liabilities. For example, a small unit leader might choose to outsource certain tasks to contractors or purchase insurance to protect against unforeseen events, thereby minimizing the impact of those risks on their own operations. By doing so, the leader effectively places the responsibility for managing and responding to that risk onto another entity that may have more resources or expertise in that area. This approach allows the primary organization to focus on its core functions while ensuring that potential risks are mitigated by those who can manage them more effectively.