D is a large oil refinery. The managers have identified four risks shown in the risk map below: Which of the risk mitigations listed below would be…

According to the TARA (Transfer, Avoid, Reduce, Accept) risk management framework, risks are managed based on their position on a likelihood/impact map. Risks with a high impact but a medium (or low) likelihood are typically managed through transference. The financial consequence of such a risk is too severe for the organization to bear (or 'accept'), but the event is not frequent enough to warrant ceasing the activity ('avoid') or investing in potentially prohibitive costs to 'reduce' it to a negligible level. Therefore, transferring the financial impact to a third party, such as through insurance, is the most appropriate and economically viable strategy for an oil refinery facing such a risk profile.

A. Accept: This response is suitable only for risks with both low impact and low likelihood, where the cost of mitigation would exceed the potential loss.

B. Reduce: While reduction measures are always prudent, for a high-impact risk, the residual impact may remain catastrophically high, making transfer a necessary strategy.

D. Avoid: This is the most extreme response, reserved for risks with both high impact and high likelihood, where the risk cannot be effectively managed otherwise.

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1. CIMA Global. (2019). CIMA Professional Qualification Syllabus: P3 Risk Management. The syllabus under Section C: Managing Risk, covers the evaluation and selection of appropriate risk responses, including the TARA framework (Transfer, Avoid, Reduce, Accept), which is a foundational concept for this question. The framework explicitly links risk profiles to response strategies.

2. Committee of Sponsoring Organizations of the Treadway Commission (COSO). (2017). Enterprise Risk Management—Integrating with Strategy and Performance. This framework, which heavily influences the CIMA syllabus, discusses risk responses in the "Performance" component (Principles 13-15). It defines "Sharing" (equivalent to Transfer) as action taken to reduce the severity of risk by transferring a portion to another party, a common response for high-severity events.

3. Hopkin, P. (2018). Fundamentals of Risk Management: Understanding, Evaluating and Implementing Effective Risk Management (5th ed.). Kogan Page. Chapter 12, "Risk Treatment," provides detailed illustrations of risk maps and the TARA framework. It consistently maps the "Transfer" strategy to risks characterized by high impact and low-to-medium likelihood, as the cost of bearing the risk is too high, but its probability does not justify avoidance.

4. Chapman, R. J. (2019). The Rules of Project Risk Management: Implementation Guidelines for Major Projects. Routledge. Chapter 5, "Risk Response Planning," discusses the application of risk response strategies. It clarifies that risk transfer is a primary tool for managing high-impact financial risks that cannot be eliminated, which directly applies to the scenario of an oil refinery. (DOI: https://doi.org/10.4324/9780429467972)