Which of the following terms describes the act of shifting the risk to another entity?

Transference is the term that specifically describes the act of shifting risk from one entity to another. This often involves transferring the financial burden of a risk to a third party, commonly through insurance, outsourcing, or contractual agreements. By transferring risk, the original party can protect itself from potential losses associated with that risk.

Acceptance refers to the acknowledgment of the existence of risk and the decision to accept the consequences without any action taken to mitigate it. Avoidance means eliminating the risk altogether, typically by changing plans to sidestep the risk exposure. Mitigation involves implementing strategies to reduce either the likelihood or the impact of a risk. Transference stands out as the approach that involves handing over the responsibility of the risk to an external entity, thus allowing better risk management and financial stability for the transferring party.