Risk Management & Mitigation Flashcards

A company buys a cyber liability policy to cover potential data breach costs. Which risk response is this?

Answer: Transfer

Insurance shifts the financial consequences of a loss to a third party, which is risk transfer.

Management decides not to enter a market because of political instability. Which response strategy is this?

Answer: Avoidance

Avoidance eliminates the risk by not undertaking the activity that creates it.

Which is an example of active risk acceptance?

Answer: Setting aside a contingency reserve for a low-impact risk

Active acceptance acknowledges the risk and plans for it, such as with a contingency reserve.

Using two suppliers instead of one for a critical component primarily reduces which risk?

Answer: Supply concentration risk

Diversifying suppliers lowers dependence on a single source and the impact of its failure.

A fuel-dependent firm locks in prices through forward contracts. What type of risk is being managed?

Answer: Commodity price risk

Forward contracts hedge against adverse swings in commodity prices.

What is a risk trigger?

Answer: An early warning sign that a risk event may be about to occur

Triggers are indicators that signal a risk is occurring or imminent, prompting the planned response.

What is a fallback plan used for?

Answer: Responding if the primary risk response proves ineffective

A fallback plan is a secondary response activated when the original response does not work.