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Difficulty: EasyRisk Identification, Assessment, and Response Strategies

An organization plans to host a critical public web application with a third-party cloud service provider. To protect against potential loss of revenue due to service outages, the organization negotiates a Service Level Agreement (SLA) that obligates the vendor to pay financial remedies if uptime falls below 99.9%. Which of the following risk response strategies is the organization implementing with this contractual provision?

  1. Risk TransferAnswer
  2. B
    Risk Avoidance
  3. C
    Risk Mitigation
  4. D
    Risk Acceptance

Answer

Risk Transfer
Risk transfer is a strategy where the financial impact or responsibility of a potential loss is shifted to a third party, such as through insurance policies, warranties, or service level agreements (SLAs) containing financial penalty clauses.

Step-by-Step Solution

1
Analyze the scenario details.
The organization uses a contractually binding agreement (SLA) to enforce financial compensation from a third party in the event of an outage.
Shifting financial liability or operational responsibility to a external entity characterizes risk transfer.

Key Concept

Risk Transfer Strategy
Estimated Time:45s
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Topics

Risk Identification, Assessment, and Response Strategies

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