Which term describes a strategy that passes the risk to a third party, most commonly an insurance company?

Which term describes a strategy that passes the risk to a third party, most commonly an insurance company?

• A. Risk Avoidance
• B. Risk Management
• C. Risk Mitigation
• D. Risk Transference

Answer: (D)

Risk transference is a strategy that passes the potential losses to a third party, typically through contracts or insurance. In security risk management, you might buy cyber insurance to cover costs from a breach or enter into service agreements where a vendor bears certain liabilities. The core idea is that the financial burden shifts away from your organization while the risk itself may still exist. This is why it fits the description best: the emphasis is on shifting responsibility to another party, commonly an insurance company. For contrast, risk avoidance means not engaging in the activity at all; risk management is the broad process of identifying and addressing risks; risk mitigation aims to reduce either the likelihood or impact of a risk, without necessarily transferring the risk to someone else.

Risk transference is a strategy that passes the potential losses to a third party, typically through contracts or insurance. In security risk management, you might buy cyber insurance to cover costs from a breach or enter into service agreements where a vendor bears certain liabilities. The core idea is that the financial burden shifts away from your organization while the risk itself may still exist. This is why it fits the description best: the emphasis is on shifting responsibility to another party, commonly an insurance company.

For contrast, risk avoidance means not engaging in the activity at all; risk management is the broad process of identifying and addressing risks; risk mitigation aims to reduce either the likelihood or impact of a risk, without necessarily transferring the risk to someone else.