If an employee is liable for a loss, how is the cost allocated?

The correct answer reflects the specific allocation policy of costs in the context of risk management within the organization. In this scenario, where an employee is held liable for a loss, the financial responsibility is divided between the branch and the region according to predetermined thresholds.

By charging the first $5,000 to the branch, it recognizes that the branch bears some initial financial risk or cost related to the incident. This can be understood as covering smaller losses through the branch's operational budget. The allocation of the next $45,000 to the region indicates that the organization has set a larger financial accountability at the regional level for incidents that exceed this threshold, which might reflect a more systemic, less localized issue.

This structure incentivizes branches to manage risks effectively while ensuring that larger, more impactful losses are absorbed at a higher organizational level. It balances accountability and support between different levels of the organization.