Portobello is an Italian manufacturing company that produces canned tomato sauces. It imports a lot of its tomatoes from Latin America as there isn't…

The technique Portobello has used is risk transfer. In risk management, 'transfer' involves shifting the financial consequences of a risk to a third party. By purchasing insurance, Portobello pays a premium to an insurance company, which in return agrees to compensate Portobello for the financial loss of the tomatoes if the ship sinks or is significantly delayed. This action does not eliminate the physical risk to the shipment but transfers the financial burden associated with that risk to the insurer. This is a standard and direct application of the risk transfer strategy.

A. tolerate: This implies accepting the potential loss without taking any specific action, which is contrary to purchasing insurance.
B. treat: This involves taking actions to reduce the likelihood or impact of the risk itself (e.g., using more reliable ships), not just its financial consequence.
D. terminate: This would mean eliminating the risk by stopping the activity causing it, such as ceasing to import tomatoes from Latin America.

1. CIPS. (2018). Managing Supply Chain Risk (L5M2). CIPS Profex Study Guide. Stamford

UK: Chartered Institute of Procurement & Supply. Chapter 2: Risk Management Processes

Section on 'Risk Response and Control'

details the '4 Ts' framework

explicitly defining insurance as a primary method of risk transfer.

2. Waters

D. (2011). Supply Chain Risk Management: Vulnerability and Resilience in Logistics. Kogan Page Publishers. Chapter 6: Responding to Risk

pp. 119-121. This section explains risk response strategies

stating

"Risk transfer moves the impact of a risk to a third party... The most common way of transferring risk is through insurance."

3. Christopher

M.

& Peck

H. (2004). Building the Resilient Supply Chain. The International Journal of Logistics Management

15(2)

1-13. The article discusses risk mitigation strategies

including transferring risk through contractual agreements and insurance to shift financial liability. (https://doi.org/10.1108/09574090410700275)