Question

A manufacturing firm identified that it would have difficulty sourcing raw materials locally, so it decided to relocate its production facilities. According to COSO, this decision represents which of the following responses to the risk?

A. Prospect theory.
B. Risk acceptance.
C. Risk sharing.
D. Risk reduction

Answer 1

D. Risk reduction

Step-by-step explanation:

Based on the information provided within the question it can be said that this decision represents risk reduction. This refers to the actions of a company done in order to reduce the risk that they are exposed to in order to prevent financial losses. Which is what COSO is doing by relocating in order to prevent problems when sourcing raw materials, which would cause financial losses.