Sustainability and Climate Risk (SCR) — Question 36

The risk team at an agricultural company in Easter Europe evaluates crop yield production performance. The evaluation reveals high temperature and water shortages will likely harm crop production, and current company insurance will not mitigate this exposure. The team recommends increasing coverage by purchasing an additional insurance policy that includes area yield protection.
According to the COSO ERM framework, which risk response strategy did the team recommend?

Answer options

• A. Pursuit
• B. Sharing
• C. Reduction
• D. Acceptance

Correct answer: B

Explanation

The recommended strategy is 'Sharing' because the team is advising the company to transfer part of the risk to another entity through additional insurance coverage. The other options do not fit as 'Pursuit' implies taking on more risk, 'Reduction' would involve mitigating the current risk directly, and 'Acceptance' means acknowledging the risk without any specific actions to address it.