Question

If a company chooses to purchase cyber-liability insurance to cover a potential data breach, which risk response strategy are they utilizing?

Accepted Answer

A company purchasing cyber-liability insurance to cover a potential data breach is utilizing the risk transference strategy, also known as risk sharing. Risk transference is the process of moving the financial impact of a specific risk from the organization to a third party. When an organization buys insurance, it enters into a contract where the insurer agrees to pay for certain losses or liabilities in exchange for a premium payment. By doing this, the organization does not eliminate the possibility of a breach occurring, but it effectively shifts the economic burden of the recovery costs, legal fees, and potential fines away from itself and onto the insurance provider. This strategy is most effective for high-impact risks that are difficult to prevent entirely through technical or operational controls alone.

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If a company chooses to purchase cyber-liability insurance to cover a potential data breach, which risk response strategy are they utilizing?

A company purchasing cyber-liability insurance to cover a potential data breach is utilizing the risk transference strategy, also known as risk sharing. Risk transference is the process of moving the financial impact of a specific risk from the o....