Risk transfer is one of the ways to address risks according to the ISO 31000 standards. This method involves shifting the risk to another party. This can be achieved through various means, including external insurance and outsourcing. External insurance allows an organization to transfer the financial risk associated with a particular event to an insurance company. On the other hand, outsourcing involves delegating certain business operations to third-party entities, thereby transferring the associated risks as well. This method is particularly useful when the third party has better capabilities or resources to manage the risk. However, it's important to note that risk transfer doesn't eliminate the risk entirely; it merely shifts the responsibility of managing the risk.

Choice A is incorrect. While risk transfer is a valid method of addressing risks, it's not accurate to say that all risks can be transferred to a third party. Some risks are inherent and cannot be completely transferred.

Choice B is incorrect. Termination should not necessarily be the first response action in case of an operational risk event according to ISO 31000 standards. The response should depend on the nature and severity of the risk, and could involve other strategies such as mitigation or acceptance.

Choice D is incorrect. Tolerance does not involve all types of risk mitigations, especially internal controls aimed at reducing the probability. Tolerance refers to accepting the existence of a particular risk and deciding to live with it rather than taking actions to remove or mitigate it.

Things to Remember

• Enterprise Risk Management (ERM) is a comprehensive approach to identifying, assessing, and managing risks across an organization.
• ISO 31000 is an international standard that provides guidelines and principles for effective risk management.