In risk management, which term explains incentivizing behavior to shift costs?

In risk management, which term explains incentivizing behavior to shift costs?

• A. Reciprocity
• B. Right-to-self determination
• C. Moral Hazard
• D. Committee

Answer: (C)

Moral hazard explains incentivizing behavior to shift costs. When someone is insulated from the full consequences of their actions, their behavior may change in ways that push costs onto others—such as a patient or organization taking more risks or using more resources because the financial burden isn’t borne entirely by them. In risk management, this dynamic means incentives can lead to riskier decisions or to shifting financial responsibility to insurers, employers, or the broader system. The other terms don’t describe this cost-shifting incentive: reciprocity is mutual exchange, right-to-self determination concerns autonomy, and a committee is simply a group.

Moral hazard explains incentivizing behavior to shift costs. When someone is insulated from the full consequences of their actions, their behavior may change in ways that push costs onto others—such as a patient or organization taking more risks or using more resources because the financial burden isn’t borne entirely by them. In risk management, this dynamic means incentives can lead to riskier decisions or to shifting financial responsibility to insurers, employers, or the broader system. The other terms don’t describe this cost-shifting incentive: reciprocity is mutual exchange, right-to-self determination concerns autonomy, and a committee is simply a group.