What does transferring the risk typically involve?

Transferring the risk typically involves purchasing fidelity insurance, which is designed to protect organizations from potential financial losses resulting from fraudulent activities committed by employees or external parties. By obtaining this insurance, an organization can mitigate the financial impact of fraud, thereby shifting the burden of risk to the insurance provider. This action does not eliminate the risk but instead reduces the financial consequences associated with it.

In contrast to eliminating high-risk activities, which directly addresses the risky behavior but may not be feasible in all situations, transferring risk through insurance allows organizations to continue their operations while safeguarding against potential losses. Implementing stricter guidelines and conducting regular audits are valuable risk management practices, but they primarily focus on controlling and monitoring risk rather than transferring it. Therefore, purchasing fidelity insurance is the most pertinent choice for effectively transferring risk in the context of fraud prevention.