Which term describes the strategy of staying away from potential risk?

The strategy of staying away from potential risk is accurately described by the term "Risk Avoidance." This approach involves altering plans to sidestep the possibility of loss altogether. For example, if a business decides not to engage in certain high-risk activities, it effectively avoids exposure to any associated risks. This method is particularly useful when the potential consequences of a risk are significantly detrimental, allowing individuals or organizations to maintain a safer profile.

In contrast, risk retention involves accepting the risk and its consequences, which might be suitable for minor risks that the entity can manage. Risk transfer refers to shifting the burden of risk to another party, often seen in insurance practices where the risk of loss is transferred to an insurance company. Risk sharing involves distributing the risk among multiple parties, which can mitigate the impact on any single entity but does not eliminate the risk itself. Understanding these distinctions is key in risk management strategies, clarifying the importance of risk avoidance as a proactive measure against potential threats.