Which statement best matches the four risk management techniques with practical examples?

Which statement best matches the four risk management techniques with practical examples?

• A. Avoidance: stop engaging in dangerous activities; Retention: self-insure small, predictable losses; Reduction: install safety measures; Transfer: purchase insurance.
• B. Avoidance: continue dangerous activities; Retention: avoid any loss; Reduction: minimize safety measures; Transfer: outsource all risk.
• C. Avoidance: implement safety measures; Retention: transfer risk to third parties; Reduction: accept higher risk; Transfer: refuse insurance.
• D. Avoidance: stop dangerous activities; Retention: instantly eliminate all losses; Reduction: increase exposure; Transfer: give away all assets.

Answer: (A)

The main idea is how risk management techniques are applied in practice: avoid the risk, keep some risk ourselves, reduce the risk, or transfer the risk to someone else. Avoidance means staying away from the risk entirely, so stopping dangerous activities is the classic example. Retention involves accepting and funding the risk ourselves, especially small, predictable losses that we’re willing to self-insure. Reduction is about lowering either the probability of the loss or its impact, which is done through safety measures and safeguards. Transfer shifts the risk to another party, typically by purchasing insurance or outsourcing the risk to a third party. The statement that matches these correctly uses: avoidance as stopping dangerous activities, retention as self-insuring small, predictable losses, reduction as installing safety measures, and transfer as purchasing insurance. Other options mix up the definitions—for example, continuing dangerous activities for avoidance, avoiding all losses for retention, or implying unsafe or impractical actions like refusing insurance or eliminating losses instantly.

The main idea is how risk management techniques are applied in practice: avoid the risk, keep some risk ourselves, reduce the risk, or transfer the risk to someone else. Avoidance means staying away from the risk entirely, so stopping dangerous activities is the classic example. Retention involves accepting and funding the risk ourselves, especially small, predictable losses that we’re willing to self-insure. Reduction is about lowering either the probability of the loss or its impact, which is done through safety measures and safeguards. Transfer shifts the risk to another party, typically by purchasing insurance or outsourcing the risk to a third party.

The statement that matches these correctly uses: avoidance as stopping dangerous activities, retention as self-insuring small, predictable losses, reduction as installing safety measures, and transfer as purchasing insurance. Other options mix up the definitions—for example, continuing dangerous activities for avoidance, avoiding all losses for retention, or implying unsafe or impractical actions like refusing insurance or eliminating losses instantly.