Which of the following describes the act of insuring a risk against possible loss?
A. Loss management
B. Risk transfer
C. Hazard reduction
D. Risk avoidance

Risk transfer refers to the process of shifting the financial burden of a potential loss from one party to another, typically through insurance. When you purchase insurance, you essentially transfer the risk of certain financial losses to the insurance company, so if a loss occurs, they bear the cost.

In practice, businesses use risk transfer to protect their assets and ensure that unexpected events don’t derail their operations. For example, a small bakery might insure its equipment against fire damage, meaning that if a fire occurs, the insurance will cover the replacement costs instead of leaving the bakery to shoulder the entire financial hit.