Question

Many organizations purchase insurance policies to provide various liability coverage for information security risks, including any physical damage of assets, hacking attacks, etc. Which of the following risk management techniques are being employed?

A. Risk avoidance
B. Risk transfer
C. Risk acceptance
D. Risk insurance

Answer 1

The correct option is B. Organizations employ the risk transfer technique when buying insurance policies to cover information security risks, effectively transferring financial risk to insurers. Insurers then encourage businesses to minimize risks by implementing security measures and possibly offering lower rates.

Step-by-step explanation:

When an organization purchases insurance policies to cover various liability coverages for information security risks, including physical damage of assets, hacking attacks, etc., it employs the risk transfer technique. This is because the organization is transferring the financial risk associated with these security issues to an insurance company.

The insurance company, in turn, may take measures to reduce moral hazard, such as offering lower rates for companies that implement stronger security measures, as a means of encouraging their clients to maintain a minimum level of security and reduce the likelihood of claims.