In reviewing his company's operations,a risk manager noticed that all of the company's finished goods were stored in a single warehouse.The risk manager recommended that the finished goods be divided among three warehouses to prevent all of the finished goods from being destroyed by the same peril.Dividing the finished goods among three warehouses illustrates
A)risk avoidance.
B)risk control.
C)insurance.
D)noninsurance transfer.

Question

Quizplus · Accepted Answer

Dividing the finished goods among three warehouses is an example of risk control, where a risk is managed by taking steps to reduce the likelihood or impact of a potential loss. By splitting the inventory, the company is spreading the risk among multiple locations, reducing the likelihood of losing all the inventory in the case of a disaster. Risk avoidance would involve completely avoiding the activity that poses a risk, while insurance and noninsurance transfer involve transferring the risk to another party (such as an insurance company or a contractual agreement).

In Reviewing His Company's Operations,a Risk Manager Noticed That All