When a company purchases a flood insurance policy for its data center, the risk management decision it took is: 4) Transference.
Risk management can be defined as a process which involves identifying, evaluating, analyzing and controlling potential risks (threats) that are present in a business, which can serve as an obstacle to its capital, revenues and profits.
Basically, risk management decision typically involves prioritizing cause of action or potential threats, so as to avoid, mitigate or transfer the risk that are likely to arise from such business decisions.
The risks or threats that are faced by a business firm can be transferred to a third-party such as an insurance agency, especially to protect its assets and resources in the event of a natural disaster such as flood, fire, earthquake, etc.
In conclusion, transference is a risk management decision that occurs when a company purchases a flood insurance policy for its data center.
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