1. A Chief Information Security Officer (CISO) determines that a major security incident will cost the company $500,000. The CISO purchases insurance to pay $400,000 of this projected cost. Which of the following risk management strategies has the CISO adopted?
Answer: D
The CISO has adopted the transference risk management strategy.
By purchasing insurance to cover a significant portion of the projected cost from a major security incident, the CISO effectively transfers the financial burden of that risk to the insurance company.
A) Acceptance
Acceptance involves acknowledging the risk and deciding to bear the consequences without taking any action to mitigate it. In this scenario, the CISO is not accepting the full financial impact of the incident but rather seeking to alleviate it through insurance, thus this option is incorrect.
B) Mitigation
Mitigation refers to implementing measures to reduce the likelihood or impact of a risk. While the CISO is taking steps to address the financial implications of the incident, purchasing insurance specifically shifts the risk rather than reducing it, making this option incorrect.
C) Avoidance
Avoidance means eliminating the risk entirely by taking steps to ensure that the incident does not occur. Since the CISO is not eliminating the risk but rather transferring part of its financial impact, this option does not apply.
D) Transference
Transference is when the responsibility for handling a risk is shifted to a third party, such as through insurance. By opting for insurance to cover $400,000 of the anticipated cost, the CISO has effectively transferred the financial risk associated with the incident, confirming that this is the correct option.
Conclusion
The CISO's decision to purchase insurance clearly exemplifies the transference strategy, as it involves shifting the financial risk to an insurance provider. Other options, such as acceptance, mitigation, and avoidance, do not apply because they focus on different approaches to managing risk that do not involve transferring the financial liability. Thus, transference is the most accurate characterization of the CISO's actions in this scenario.