A construction company is building a plant in a territory that is prone to earthquakes. To address the risk and consequences of potential earthquakes during and after plant construction, the company…

The correct answer is D. Transferring. Purchasing insurance is the textbook example of the 'Transfer' risk response strategy. Transferring risk means shifting the financial consequences of a risk to a third party (in this case, the insurance company). The risk itself (earthquakes) still exists and has not been…

Project management concepts

Question

A construction company is building a plant in a territory that is prone to earthquakes. To address the risk and consequences of potential earthquakes during and after plant construction, the company purchases additional insurance. Which of the following risk responses has occurred?

Options

AAvoiding
BMitigating
CAccepting
DTransferring

How the community answered

(26 responses)

B
8% (2)
C
4% (1)
D
88% (23)

Explanation

Purchasing insurance is the textbook example of the 'Transfer' risk response strategy. Transferring risk means shifting the financial consequences of a risk to a third party (in this case, the insurance company). The risk itself (earthquakes) still exists and has not been eliminated, reduced in likelihood, or accepted without action-it has simply been shifted so another party bears the financial impact. Avoiding means eliminating the risk entirely (e.g., building elsewhere). Mitigating means reducing the probability or impact. Accepting means acknowledging the risk and taking no proactive action. Insurance = Transfer.

Topics

#risk transfer#risk response strategies#insurance#risk management

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