What type of risk-financing arrangement results in the pooling or transfer of risk?

The correct answer identifies banking pools as a type of risk-financing arrangement that results in the pooling or transfer of risk. Banking pools involve a collaborative approach where multiple entities, such as businesses or organizations, come together to share risks. This can be particularly useful in situations where individual entities may face too great a financial burden if a loss occurs. By pooling resources, each participant can share in both the potential losses and the costs related to managing those risks, thus spreading the financial impact over a larger group.

The pooling of risk is a fundamental concept in risk management, allowing participants to mitigate individual exposure through collective action. This arrangement is often seen in insurance and other financial products where the risks of many are aggregated to create a buffer for unexpected losses.

Although account pools may refer to methods of pooling financial resources, they do not specifically emphasize the risk-financing aspect of pooling or transferring risk in the same way banking pools do. Hence, the focus on banking pools as a mechanism that clearly embodies the principle of risk financing reinforces why it is the correct choice in this context.