Which activity is considered an example of risk sharing?

Which activity is considered an example of risk sharing?

• A. Moving a function to another department.
• B. Selling a product or service to another company.
• C. Deploying redundant firewalls.
• D. Contracting with a third party.

Answer: (D)

Risk sharing involves distributing the potential consequences of risks across multiple parties rather than absorbing the risks entirely by one entity. This is often achieved through contracts or partnerships, where responsibilities and risks are allocated among different stakeholders. Contracting with a third party is a prime example of risk sharing because it allows an organization to transfer a portion of its risk to another entity. In this arrangement, the third party assumes responsibility for certain risks, and the organization benefits from the shared burden, which can lead to a reduction in overall risk exposure. In contrast, other choices do not exemplify risk sharing in the same way. Moving a function to another department typically involves internal resource allocation and does not distribute risk outside of the organization. Selling a product or service to another company does not inherently transfer risks related to operational processes or failures. Lastly, deploying redundant firewalls is a risk mitigation strategy aimed at protecting against network failures or breaches rather than sharing risk with another party.

Risk sharing involves distributing the potential consequences of risks across multiple parties rather than absorbing the risks entirely by one entity. This is often achieved through contracts or partnerships, where responsibilities and risks are allocated among different stakeholders.

Contracting with a third party is a prime example of risk sharing because it allows an organization to transfer a portion of its risk to another entity. In this arrangement, the third party assumes responsibility for certain risks, and the organization benefits from the shared burden, which can lead to a reduction in overall risk exposure.

In contrast, other choices do not exemplify risk sharing in the same way. Moving a function to another department typically involves internal resource allocation and does not distribute risk outside of the organization. Selling a product or service to another company does not inherently transfer risks related to operational processes or failures. Lastly, deploying redundant firewalls is a risk mitigation strategy aimed at protecting against network failures or breaches rather than sharing risk with another party.