Which risk management strategy could involve buying insurance?

The strategy of transferring risk often involves purchasing insurance. When an individual or organization buys insurance, they are essentially transferring some of the financial risks associated with potential losses to the insurance company. This means that if an event occurs that leads to a loss—such as property damage, liability, or other unforeseen events—the insurance company will take on the financial burden as outlined in the policy.

Transferring risk through insurance allows the insured party to manage potential financial impacts and gain peace of mind, knowing they have coverage in place. This is a fundamental concept in risk management, where organizations and individuals assess their exposure to various risks and decide to offset those risks by transferring them to third parties, like insurers, rather than retaining or mitigatively managing them themselves.