Final answer:
A company that avoids high-risk activities should employ risk avoidance, which entirely eliminates potential risks and aligns with a cautious approach to business, in line with asymmetric risk management.
Step-by-step explanation:
To align with its desired risk management approach, which emphasizes a cautious stance towards high-risk activities, a company should employ risk avoidance. Risk avoidance involves identifying potential risks and making deliberate decisions to eliminate those risks, thus avoiding any potential negative consequences altogether. This strategy is in contrast with risk acceptance, which means taking on the risk and its potential consequences; risk mitigation, which involves reducing the severity or likelihood of the risk; and risk transfer, which means shifting the risk to another party, typically through insurance or other contractual agreements.
The choice of risk avoidance for a cautious company is consistent with the concept of asymmetric risk discussed in the provided reference. When facing a potentially catastrophic threat, the company would lean towards action plans that mitigate potential damage. While there is a cost associated with being overly cautious, such as 'wasted' time and effort, this cost is generally seen as preferable to the catastrophic consequences of not preparing for a low-probability, high-impact event.