Certified Human Resource Professional (CHRP) Practice Exam

What is an example of a risk transfer strategy?

1. Ensuring compliance with safety standards

2. Discontinuing a discriminatory bonus program

3. Providing health benefits through an insurer

4. Providing risk management training for managers

The correct answer is: Providing health benefits through an insurer

The correct and best example of a risk transfer strategy is providing health benefits through an insurer. This illustrates the concept of risk transfer because the organization shifts the financial risk associated with health-related expenses to an insurance company. By purchasing health insurance, the employer transfers the risk of high medical costs for employees to the insurer, which pools risk among many policyholders and is better equipped to manage unforeseen health expenses. This approach allows the employer to have a predictable cost structure while mitigating the direct financial impact of healthcare-related risks. In contrast, ensuring compliance with safety standards focuses on reducing the potential for risks rather than transferring them. Discontinuing a discriminatory bonus program is a corrective measure addressing an internal issue, but it does not involve the transfer of risk to another party. Providing risk management training for managers builds internal capacity to manage risks but does not involve transferring risk away from the organization.