Question

A financial services firm outsources credit card payment processing to a third-party provider. The contract shifts operational responsibility to the provider, but recent breach headlines have made the firm's leadership nervous about reputational and regulatory consequences if the provider is compromised. The information security manager is asked to characterize the firm's residual exposure after this outsourcing arrangement. Which statement should the security manager convey to leadership?

Accepted Answer

The firm has shared operational risk with the provider, but accountability for the outcome and residual reputational and regulatory risk remain with the firm.

Answer

Outsourcing the processing constitutes risk avoidance, so the firm no longer carries any related risk.

Answer

Because the contract transfers responsibility, the provider now owns all risk and the firm's residual risk is zero.

Answer

The firm has fully mitigated the risk since a specialized provider has stronger controls than the firm could implement internally.