CISM Information Security Risk Management Practice Question
A global insurance provider has completed a risk assessment for a new policyholder web portal. The risk treatment plan includes purchasing cyber insurance to transfer a portion of the financial impact. Which of the following is the PRIMARY consideration when evaluating this treatment option?
⚠ Common exam trap
The trap here is assuming that cyber insurance fully eliminates financial risk, when in reality it transfers only a portion and must be evaluated against cost and risk appetite.
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
✓
The cost of the premium relative to the potential financial impact and risk appetite
Risk transfer via insurance is justified when the premium is reasonable relative to the potential loss and the residual risk after deductibles and limits remains within the organization's risk appetite. The other factors, such as speed, peer adoption, or hopes of full coverage, do not address the fundamental cost-benefit and risk tolerance alignment required for effective treatment selection.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
The number of other organizations that have purchased similar coverage
Why it's wrong here
Peer adoption rates do not determine whether insurance is the right treatment for this organization's specific risk. Risk decisions must be based on the organization's own risk appetite, impact analysis, and cost-benefit assessment, not on popularity. Following peers could result in coverage that is misaligned with the actual risk profile and financial capacity.
- ✗
The insurer's ability to cover the full impact of a catastrophic breach
Why it's wrong here
Insurance is rarely intended to cover the full impact of a catastrophic breach; policies typically have limits, sublimits, and exclusions. Focusing on full coverage misrepresents how risk transfer works and ignores the organization's retention of residual risk. The primary consideration is whether the transfer aligns with risk appetite and cost, not whether the policy eliminates all financial exposure.
- ✓
The cost of the premium relative to the potential financial impact and risk appetite
Why this is correct
Risk transfer through insurance must be evaluated against the cost of the premium, the potential financial impact being transferred, and the organization's risk appetite. If the premium is disproportionate to the expected loss or the retained deductible remains outside tolerance, the treatment is ineffective. This comparison ensures the treatment is economically justified and aligned with business objectives.
- ✗
The speed at which the policy can be underwritten and bound
Why it's wrong here
While speed of underwriting may affect implementation timelines, it is not the primary consideration for evaluating a risk treatment option. The decision should be driven by whether the transfer reduces risk to an acceptable level at a reasonable cost, not by administrative turnaround. Expedience alone could lead to inadequate coverage or unfavorable terms that fail to address the 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 ISACA exam blueprint
This CISM practice question is part of Courseiva's free ISACA certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the CISM exam.