- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 66. Introduction to Risk Management
- Subject 4. Measuring and Modifying Risks
CFA Practice Question
Self-insurance is a form of ______.
B. risk acceptance
C. risk transfer
A. risk prevention
B. risk acceptance
C. risk transfer
Correct Answer: B
The organization is still exposed to risk in this case, but with enough capital to cover possible losses.
User Contributed Comments 3
| User | Comment |
|---|---|
| ibrahim18 | I thought the answer should be C. Risk transfer. Can someone please explain this? |
| jklaassens | Risk transfer is the process of shifting the risk to someone else (e.g. Reinsurance). In the case of self-assurance, they are not aiming to remove the risk, rather "accepting" it and being prepared (by setting aside cash to cover potential loss) |
| pigletin | C is not wrong cuz you literally transfer risk to the capital you put aside in case the bad things happen. the capital can be seen as another party although it is you from you. |