Question

Clarissa manages an apartment complex. She requires tenants to carry renters insurance. This is an example of what type of risk management?

a) Transferring risk.

b) Accepting risk.

c) Avoiding risk.

d) Mitigating risk.

Answer 1

Requiring tenants to carry renters insurance is an example of transferring risk in risk management. This strategy shifts potential costs from the apartment complex to an insurance company, safeguarding both the property manager and tenants financially.

Step-by-step explanation:

When Clarissa, who manages an apartment complex, requires her tenants to have renters insurance, she is practicing a type of risk management known as transferring risk. This means that the potential costs associated with certain risks, like property damage or theft, are transferred from the owner or manager of the apartment complex to an insurance company. This is a common strategy in business and property management to protect financial interests without directly dealing with the potential costs or liabilities oneself. It allows both the property manager and the tenants to have peace of mind, knowing that they are covered in the event of unforeseen circumstances.