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Governance, Risk, Audit & Privacy · Foundational

Risk Transference

Shifting the financial impact of a risk to a third party, such as through insurance or contracts.

Definition

Risk transference (risk sharing) uses cyber insurance, indemnification clauses, or outsourcing to move some consequences to another party. Legal and regulatory accountability, along with reputational damage, generally remains with the organization. Contracts must be reviewed to ensure the third party can actually absorb the loss.

Example

A retailer buys a cyber insurance policy covering breach notification and forensic costs.

Exam tip

Accountability cannot be transferred; only some financial impact can.

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