An organization has decided to purchase an insurance policy because a risk assessment determined that the cost to remediate the risk is greater than the five- year cost of the insurance policy. The organization is enabling risk:
Answer: Risk Transference
Risk Transference is transferring risk to a third party such as a vendor. In cyber security, that can be through utilizing cyber-risk insurance. Cyber insurance generally covers a business' liability for a data breach involving sensitive customer information, such as account numbers, credit card numbers, health records etc.
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Other Choices:
Risk Avoidance - Strategy that eliminates risk by avoiding activities that would expose themselves to the risk.
Risk Mitigation - the practice of reducing the impact of risks through preventative and reactive planning
Risk Acceptance - When a business or individual accepts the potential loss from a risk. Generally occurs when the business or individual feels that the risk does not warrant the countermeasures.
The organization is enabling risk transference by purchasing an insurance policy to cover the potential financial losses associated with the identified risk. Transference involves shifting the financial impact of a risk to another party, such as an insurance provider. In this scenario, the organization is accepting the risk (by not investing in remediation) and transferring the financial consequences to the insurance policy provider.
In this scenario, the organization has decided to purchase an insurance policy to cover the potential financial losses associated with a risk. By transferring the risk to an insurance provider, the organization is shifting the financial burden and responsibility of managing the risk to the insurance company. This allows the organization to mitigate the potential impact of the risk by having the insurance policy cover the costs of remediation or any losses incurred.
Transference as the financial loss if the risk materializes is transferred to the insurance company
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