Quick Answer
The answer is risk transfer. Purchasing cyber insurance is a textbook example of risk transfer because it shifts the financial burden of a potential data breach to a third-party insurer, while the organization still retains the underlying threat and vulnerability. In the CRISC exam, this question tests your ability to distinguish risk transfer from other response strategies like mitigation or acceptance, as it falls under the Risk Response and Mitigation domain. A common trap is confusing transfer with mitigation—remember, mitigation reduces the likelihood or impact, whereas transfer simply moves the financial risk elsewhere. For risk transfer examples like insurance, the key memory tip is “pay to pass the pain,” meaning you pay a premium to pass the financial pain of a loss to the carrier, even though the security risk itself remains.
This CRISC practice question tests your understanding of risk response and mitigation. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
An organization purchases cyber insurance to cover potential losses from data breaches. This is an example of:
Risk Avoidance
Why wrong: Avoidance means ceasing the activity that causes risk.
Risk Transfer
Insurance is a classic example of risk transfer.
Risk Mitigation
Why wrong: Mitigation involves reducing risk through controls, not transferring financial impact.
Risk Acceptance
Why wrong: Acceptance would be tolerating the risk without transferring or mitigating.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Risk Transfer
Purchasing cyber insurance transfers the financial risk of a data breach to the insurer, making it a classic example of risk transfer. In risk management, transfer shifts the impact of a loss to a third party (e.g., an insurance carrier) without eliminating the underlying threat or vulnerability. This aligns with the CRISC domain of Risk Response and Mitigation, where transfer is a distinct response strategy.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
Risk Avoidance
Why it's wrong here
Avoidance means ceasing the activity that causes risk.
Risk Transfer
Why this is correct
Insurance is a classic example of risk transfer.
Related concept
Read the scenario before looking for a memorised answer.
Risk Mitigation
Why it's wrong here
Mitigation involves reducing risk through controls, not transferring financial impact.
Risk Acceptance
Why it's wrong here
Acceptance would be tolerating the risk without transferring or mitigating.
Common exam traps
The trap here is that candidates confuse risk transfer with risk mitigation, thinking insurance reduces the likelihood of a breach, when in fact it only shifts the financial consequences.
Detailed technical explanation
Cyber insurance policies often require proof of specific security controls (e.g., multi-factor authentication, endpoint detection and response) as a condition of coverage, linking risk transfer to prior mitigation efforts. Under the hood, the insurer uses actuarial models based on breach frequency and severity data (e.g., from Verizon DBIR) to set premiums, and claims may involve forensic investigation costs, legal defense, and regulatory fines. A real-world scenario: after a ransomware attack, the insured organization files a claim, and the insurer covers the ransom payment (if policy allows) and incident response costs, but the organization still suffers operational downtime and reputational harm—showing transfer does not eliminate all risk.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
A small business has 20 workstations on the 192.168.1.0/24 network and one public IP from its ISP. The router uses PAT (NAT overload) so all 20 devices share one public address using different source ports. NAT questions test whether you understand the four address terms and which direction each translation applies.
What to study next
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
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FAQ
Risk Response and Mitigation — This question tests Risk Response and Mitigation — Read the scenario before looking for a memorised answer..
The correct answer is: Risk Transfer — Purchasing cyber insurance transfers the financial risk of a data breach to the insurer, making it a classic example of risk transfer. In risk management, transfer shifts the impact of a loss to a third party (e.g., an insurance carrier) without eliminating the underlying threat or vulnerability. This aligns with the CRISC domain of Risk Response and Mitigation, where transfer is a distinct response strategy.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Read the scenario before looking for a memorised answer.
About these practice questions
Courseiva creates original exam-style practice questions with explanations and wrong-answer analysis. It does not publish real exam questions, exam dumps, or protected exam content. Learn why practice questions differ from exam dumps →
Same concept, more angles
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. Which TWO of the following are examples of risk transfer? (Select TWO.)
mediumWhy A: Options A and B are correct because outsourcing and insurance both shift financial or operational risk to another party.
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Last reviewed: Jun 25, 2026
This CRISC 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 CRISC exam.
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