Which Risk Strategy involves the purchase of insurance to protect against potential losses?

The correct strategy is one that involves shifting the responsibility of risk to another party, typically through financial mechanisms rather than through operational changes. In this case, purchasing insurance serves this function effectively. By acquiring insurance, an organization transfers the financial risk of potential losses to the insurer. This means that in the event of a loss, the organization can receive compensation from the insurance company, thereby mitigating the financial impact of that loss on its operations.

This strategy is particularly useful for risks that cannot be completely eliminated or avoided and provides a safety net that allows an organization to operate without bearing the full brunt of potential financial consequences. It is a common practice in risk management to help ensure stability and continuity in business operations.

Other risk strategies, such as acceptance, avoidance, and mitigation, consider different approaches to handling risks, such as deciding to live with them, eliminating activities that bring risk, or implementing measures to reduce the likelihood or impact of the risks, respectively. However, none of these involve transferring responsibility through insurance.