Due to unfavorable economic conditions management decided to postpone new investments for the next year. Which of the following best describes the risk management strategy used to address this…

Question

Options

• ARisk mitigation
• BRisk avoidance
• CRisk reduction
• DRisk transfer

• A
  14% (8)
• B
  75% (43)
• C
  4% (2)
• D
  7% (4)

Explanation

Risk avoidance is correct because management eliminated exposure to the risk entirely by not proceeding with the investments at all - when you avoid the activity that creates the risk, you've chosen avoidance, not merely reduced or shifted it.

Why the distractors are wrong:

• A (Risk mitigation) and C (Risk reduction) both imply the investments proceed but with measures taken to lessen the impact or likelihood of loss - neither applies here since the projects were scrapped entirely.
• D (Risk transfer) would apply if the risk were shifted to another party (e.g., via insurance or outsourcing), but no such transfer occurred.

Memory tip: Think of the four strategies as a spectrum of engagement - transfer shifts it, reduce/mitigate shrinks it, but avoidance means you never show up to the game at all. If management "postpones," "cancels," or "walks away," that's avoidance.

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