A race director is planning a marathon with US$80,000 in upfront costs that will be offset by race fees. The remainder of the funds will be donated to a national charity. State law mandates that all…

Question

Options

• ALet the runners know the race will be cancelled only in the event of an emergency.
• BPurchase an insurance policy covering up to US$85,000 in losses, at a cost of US$5,000, in the
• CInform the charity that they will receive no funds should the race be cancelled.
• DCharge the runners an additional amount to cover the US$80,000.

• A
  4% (2)
• B
  85% (40)
• C
  9% (4)
• D
  2% (1)

Explanation

Purchasing an insurance policy for US$85,000 coverage at a US$5,000 premium is the best risk response here because it financially protects the race director against the primary threat: being legally required to refund all participant fees if the race is cancelled. This covers the US$80,000 upfront cost exposure and provides a small buffer. Option A (notifying runners of cancellation conditions) is merely communication, not a risk response. Option C (informing the charity) offloads impact awareness but does not address the financial risk. Option D (charging runners more) attempts to raise funds but does not protect against the refund obligation. Insurance is the most effective strategy for transferring the financial risk of cancellation.

No community discussion yet for this question.