A risk manager was asked to review all the loss exposures his company faces. The risk manager noted that the company obtained over 90 percent of its raw materials from one supplier. He voiced concern about business interruption if that supplier was closed for some reason. Acting on his recommendation, the company began to purchase raw materials from two other suppliers. Using multiple suppliers illustrates which risk control technique?
A) risk avoidance
B) duplication
C) separation
D) diversification

Question

Quizplus · Accepted Answer

This risk control technique is diversification, which involves spreading out or diversifying the sources of potential loss. In this case, the company is diversifying its suppliers to reduce the risk of business interruption due to the closure of a single supplier.

A Risk Manager Was Asked to Review All the Loss