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What is the process of Risk Transfer in information security?
Risk transfer define a risk management technique in which risk is transferred to a third party. In another terms, risk transfer involves one party considering the liabilities of another party. Purchasing insurance is an instance of transferring risk from an individual or entity to an insurance company.
Risk transfer is a common risk management approach where the potential loss from an adverse result faced by an individual or entity is shifted to a third party. It can compensate the third party for bearing the risk, the individual or entity will usually provide the third party with periodic payments.
An example of risk transfer is insurance. When an individual or entity purchases insurance, they are insuring against monetary risks. For instance, an individual who purchases car insurance is realizing financial protection against physical damage or bodily harm that can result from traffic incidents.
When done efficiently, risk transfer allocates risk equitably, locating responsibility for risk on designated parties consistent with their ability to control and insure against that risk. Liability should elegantly rest with whichever party has the most control over the sources of potential liability.
Risk Transfer is an approach that loses in the long run for medium and high risks. Risk transfer includes transferring the weight or the consequence of a risk on to multiple party. There are some ways that risk transfer can take place. Insurance is a frequently used method of risk transfer; the insurance company accepts the risk of another.
Another form of risk transfer can appears in the way that a contract is laid out. Risk transfer for low consequences is generally affordable and reasonable if some method of reasonable and prudent controls are in place. This meets due diligence standards for low risk systems. Risk transfer for medium and high consequences is unique, expensive, and only justified in cases where the worst case loss is not continual and an adequate external insurance capacity is willing to take on the risk.
Risk transfer is accomplished through an insurance policy. This is a voluntary arrangement among two parties, the insurance company and the policyholder, where the insurance company consider strictly defined monetary risks from the policyholder.
In another terms, if a worker is injured, the insurance company pays the cost. If a building burns down, the insurance company pays to restore it. Insurance companies charge a cost, or an insurance premium, for consent this risk. Moreover, there are deductibles, reserves, reinsurance and some financial agreements that change the financial risk the insurance company assumes.
Risk transfer can also be accomplished through non-insurance agreements including contracts. These contracts provide indemnification provisions. An indemnity clause is a contractual provision in which one party agrees to answer for some specified and unspecified liability or harm that the other party can incur. An indemnity clause also can be defined a hold-harmless or save-harmless clause.
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