ISM Exam LEAD Topic 3 Question 13 Discussion

Risk Management Strategy: Using an outsourced freight firm's transportation services transfers the risk associated with transportation from the company to the outsourced provider.

Definition of Transference: Risk transference involves shifting the responsibility and consequences of a risk to another party, often through contracts or insurance.

Application: By outsourcing transportation, the company relies on the freight firm to manage and mitigate risks related to delivery, such as delays, damage, or loss of goods.

Benefits: This strategy can reduce the company's direct exposure to transportation risks and leverage the expertise and resources of specialized freight firms.

Reference: Risk management frameworks, such as ISO 31000 and the PMBOK Guide, discuss risk transference as a viable strategy for managing specific types of risks by shifting them to third parties.