Risk transfer is a strategy used to manage potential losses by shifting the responsibility for certain risks to another party. This is commonly done through contracts, such as insurance policies, where an individual or organization pays a premium to an insurer, like Allstate or State Farm, in exchange for coverage against specific risks. Another way to achieve risk transfer is through outsourcing, where a company delegates certain functions to third-party providers. For example, a business might hire a logistics company to handle its shipping needs, thereby transferring the risk associated with transportation delays or damages to that provider.