Risk Management Techniques
Question
Your company is covered under a liability insurance policy, which provides various liability coverage for information security risks, including any physical damage of assets, hacking attacks, etc.
Which of the following risk management techniques is your company using?
Answers
Explanations
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A. B. C. D.A.
Risk transfer is the practice of passing risk from one entity to another entity.
In other words, if a company is covered under a liability insurance policy providing various liability coverage for information security risks, including any physical damage of assets, hacking attacks, etc., it means it has transferred its security risks to the insurance company.
Incorrect Answers: B: Risk acceptance is the practice of accepting certain risk(s), typically based on a business decision that may also weigh the cost versus the benefit of dealing with the risk in another way.
C: Risk avoidance is the practice of not performing an activity that could carry risk.
Avoidance may seem the answer to all risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have allowed.
D: Risk mitigation is the practice of reducing the severity of the loss or the likelihood of the loss from occurring.
The risk management technique that the company is using in this scenario is A. Risk transfer.
Risk transfer is a risk management technique where an organization transfers the financial impact of a risk to a third party. In this case, the company has purchased a liability insurance policy to cover the financial impact of information security risks, such as physical damage of assets, hacking attacks, and other related risks. This means that if a risk event occurs, the insurance policy will provide coverage for the financial losses incurred, up to the policy limits.
By using risk transfer, the company is essentially sharing the risk with the insurance provider, which is assuming a portion of the financial responsibility for any losses resulting from the occurrence of an information security risk. This allows the company to focus on its core operations without worrying about the financial impact of such risks.
Risk acceptance, on the other hand, is a risk management technique where an organization accepts the risk and decides not to take any action to address it. This technique is typically used for risks that are deemed acceptable based on the organization's risk appetite and tolerance levels.
Risk avoidance is a risk management technique where an organization takes steps to avoid the risk altogether. This may involve not engaging in certain activities or not entering into certain markets to avoid potential risks.
Risk mitigation is a risk management technique where an organization takes steps to reduce the likelihood or impact of a risk event. This may involve implementing controls or procedures to reduce the likelihood of the risk occurring or to minimize the impact of the risk if it does occur.
