Final answer:
To transfer risk in a project, methods include warranties and guarantees, fixed price contracts, and insurance policies. Warranties and service contracts ensure repair or replacement for a certain period, while fixed price contracts cap the cost for the buyer. Insurance transfers risk to a third party. Option A is the correct answer.
Step-by-step explanation:
Methods to transfer risk in a project are essential to ensure stability and confidence amongst all parties. One method is offering warranties and/or guarantees, which promise to correct defects within a certain period. Similarly, service contracts can transfer risk by having the seller take responsibility for repairs for a set time in exchange for an additional fee.
Fixed price contracts transfer the risk of cost overruns from the buyer to the seller, as the seller agrees to complete the project at a specified price regardless of increased expenses. On the other hand, insurance policies allow a third party to assume potential risks in exchange for premium payments, providing coverage for specific unforeseen, detrimental events.
Time and material contracts are somewhat different as they do not transfer the same level of risk to the seller. They generally place the risk on the buyer, who pays for the actual time and material used, meaning that this option has less bearing on transferring risk relative to the other methods mentioned.