Final answer:
The statement is true; managing risk involves reducing exposure to financial loss through various strategies, including insurance and investment diversification. Such methods help in preparing for low-probability but high-impact events.
Step-by-step explanation:
The statement that one method of managing risk is to accept risk by seeking to limit your exposure to a financial loss is True.
In business and finance, risk management involves identifying, assessing, and prioritizing risks followed by coordinating and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events, or to maximize the realization of opportunities. A common method to manage financial risk is through mitigation strategies like insurance, diversification of investments, and establishing emergency funds.
Insurance is one way individuals and businesses protect against financial loss by transferring the risk to an insurance company in exchange for a fee, known as a premium. Diversification of investments is crucial to manage investment risks by spreading funds across various assets to reduce the impact of a decline in any one asset.
This echoes the historical lessons that point to the dangers of a high risk level being detrimental to an investment portfolio. Strategies like these contribute to a more conservative approach and align with the notion of being prepared for low-probability but potentially catastrophic events.