Question

A manufacturing firm identified that it would have difficulty sourcing raw materials locally, so it decided to relocate its production facilities. According to COSO, this decision represents which of the following response to the risk? Risk reduction. Prospect theory. Risk sharing. Risk acceptance. More information is required.

Answer 1

In a scenario in which a manufacturing firm identified that it would have difficulty sourcing raw materials locally, so it decided to relocate its production facilities.

According to COSO, the decision represents:

Risk reduction.

Step-by-step explanation:

Risk reduction is a management paradigm that describes the process in which an individual or an institution identifies, analyzes and reduces risk. It used a multidisciplinary approach to study the whole context in which the subject participates and can reduce its risks. In this case, we can observe that the manufacturing firm identified its risks, then it analyzed the options it had and performed the actions that would allow the inducements of risks.