CAS-004 Governance, Risk, and Compliance Practice Question
A security manager is updating the organization's risk register. A new risk has been identified: a critical vendor may fail to provide timely security patches, potentially leading to a breach. The manager decides to purchase cyber insurance to cover potential financial losses from such a breach. Which risk treatment strategy does this represent?
⚠ Common exam trap
Candidates often confuse risk transference with risk mitigation; insurance does not reduce the chance of a breach, it only transfers the financial consequences.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
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Risk transference
Purchasing cyber insurance transfers the financial impact of a potential breach to the insurer. Risk transference is the correct treatment because the organization is not reducing the likelihood or impact through controls, nor is it avoiding the risk or accepting it without action. Insurance is a common method of transferring financial risk associated with vendor failures.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
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Risk transference
Why this is correct
Risk transference shifts the financial impact of a risk to a third party, typically through insurance or contracts. By purchasing cyber insurance, the organization transfers the potential financial losses from a breach to the insurer. This is a classic example of risk transference. The risk itself remains, but the financial burden is shared or shifted. This aligns with the scenario.
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Risk mitigation
Why it's wrong here
Risk mitigation reduces the likelihood or impact of a risk through controls. Buying insurance does not reduce the likelihood of a breach or its operational impact; it only provides financial compensation after the fact. Mitigation would involve implementing controls like requiring the vendor to patch within a certain timeframe or conducting regular audits. The scenario describes transferring the financial risk, not mitigating it.
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Risk avoidance
Why it's wrong here
Risk avoidance involves eliminating the activity that introduces the risk. In this scenario, the organization is not eliminating the vendor relationship; it is transferring the financial impact. Purchasing insurance does not avoid the risk of a breach; it only compensates for losses. Avoidance would mean terminating the vendor contract and finding an alternative, which is not what is described.
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Risk acceptance
Why it's wrong here
Risk acceptance means acknowledging the risk and deciding to bear the potential consequences without taking action. In this scenario, the organization is taking action by purchasing insurance, which is not acceptance. Acceptance would be documenting the risk and setting aside no additional controls or financial protection. The purchase of insurance indicates a deliberate decision to transfer, not accept, the financial risk.
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JA
Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official CompTIA exam blueprint
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