Question

Which of the following is the ideal strategy to deal with a risk that is low in frequency of losses and low in severity of losses?

a) Risk Retention

b) Risk Transfer

c) Risk Avoidance

d) Risk Mitigation

Answer 1

The ideal strategy to deal with a low-frequency, low-severity risk is Risk Retention. Risk retention involves assuming the risk and accepting any potential losses associated with it.

Step-by-step explanation:

The ideal strategy to deal with a risk that is low in frequency of losses and low in severity of losses is Risk Retention. Risk retention involves assuming the risk and accepting any potential losses associated with it. It is usually used for low-frequency, low-severity risks that the organization can easily handle without transferring or avoiding them.

Risk transfer involves transferring the risk to another party, such as through insurance, while risk avoidance involves completely avoiding the risk by not engaging in the activity that poses the risk. Risk mitigation involves taking actions to reduce the impact or likelihood of the risk.