Which situation is BEST addressed by transferring risk?

Which situation is BEST addressed by transferring risk?

• A. An antiquated fire suppression system
• B. The threat of employee sabotage
• C. The possibility of losing a USB device
• D. A building in a flood-prone area

Answer: (D)

Transferring risk involves shifting the responsibility or potential financial burden of a risk to another party. This is typically done through mechanisms such as insurance or outsourcing certain functions. In the context of a building in a flood-prone area, transferring risk is a highly effective strategy. By purchasing flood insurance or entering into a contract with a third-party disaster recovery service, an organization can mitigate the financial impact of potential flood damage. For the other situations, they each represent risks that are generally better managed through mitigation or absolute prevention rather than transfer. For example, an antiquated fire suppression system should be updated or replaced to reduce the direct risk of fire damage. Addressing employee sabotage involves implementing control measures to deter or detect such incidents, making it more about mitigation than transfer. Regarding the possibility of losing a USB device, strategies to secure the device or data are more suitable than transferring the risk, as the loss can often be managed internally through policies and training. Therefore, the scenario involving the flood-prone area is appropriately addressed through risk transfer, since the organization can protect itself financially from that specific environmental hazard.

Transferring risk involves shifting the responsibility or potential financial burden of a risk to another party. This is typically done through mechanisms such as insurance or outsourcing certain functions. In the context of a building in a flood-prone area, transferring risk is a highly effective strategy. By purchasing flood insurance or entering into a contract with a third-party disaster recovery service, an organization can mitigate the financial impact of potential flood damage.

For the other situations, they each represent risks that are generally better managed through mitigation or absolute prevention rather than transfer. For example, an antiquated fire suppression system should be updated or replaced to reduce the direct risk of fire damage. Addressing employee sabotage involves implementing control measures to deter or detect such incidents, making it more about mitigation than transfer. Regarding the possibility of losing a USB device, strategies to secure the device or data are more suitable than transferring the risk, as the loss can often be managed internally through policies and training. Therefore, the scenario involving the flood-prone area is appropriately addressed through risk transfer, since the organization can protect itself financially from that specific environmental hazard.