Question：Risk mapping is a technique for assessing the severity of a risk and the probability or frequency of its likely occurrence. For what type of risk would it probably be most appropriate to take out an insurance policy from an insurance company?
A. Severity low, frequency high.
B. Severity low, frequency low.
C. Severity high, frequency low.
D. Severity high, frequency high.
The correct answer is:Severity high, frequency low.
Insurance might be the most appropriate risk hedging strategy when the potential cost is high, but the likelihood of the adverse outcome happening is fairly low. When the frequency is high, internal measures to manage the risk would probably be more appropriate.
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