Which risk treatment method involves purchasing insurance?

The correct answer is the method that involves transferring the financial risk to another party, in this case, through the purchase of insurance. When an organization identifies a risk that may lead to potential financial losses, it can opt to mitigate that risk by transferring the associated financial burden. By purchasing insurance, the organization shifts responsibility for covering losses to the insurance company. This allows the organization to manage the potential impact of risks without bearing the full financial consequences if an incident occurs.

Transferring risk in this manner can provide a safety net, enabling a business to operate more confidently while still maintaining financial stability in the face of unforeseen events. Other risk treatment methods, such as avoiding, accepting, or mitigating risks, focus on different strategies that do not involve the transfer of financial risk through insurance. Avoiding or eliminating a risk entails changing plans to sidestep the risk altogether, accepting means taking on the risk and its potential impacts without measures to cover it, and mitigating involves reducing the severity or likelihood of the risk itself. Hence, buying insurance fits precisely within the realm of risk transfer.