Discount Department Stores is a national retail chain.The company had one large,central warehouse.At the suggestion of the risk manager,the company decided to build four smaller regional warehouses so that a loss at the central warehouse would not be a catastrophic blow to the company's distribution system.Splitting the inventory between four regional warehouses illustrates which risk management technique?
A)duplication
B)risk transfer
C)separation
D)risk avoidance

Question

Quizplus · Accepted Answer

The technique of splitting the inventory between four regional warehouses is an example of separation, which involves dividing up a risk into smaller parts to minimize the impact of a potential loss. This reduces the concentration of risk in one location, which can help to avoid a catastrophic outcome if a loss occurs. This is different from duplication, which involves creating backups or redundancies to ensure continuity of operations, and risk transfer, which involves shifting the financial consequences of a risk to another party through insurance or contracts. Risk avoidance, on the other hand, involves avoiding a particular risk altogether by not engaging in certain activities or exposures.

Discount Department Stores Is a National Retail Chain