In risk management, which technique involves budgeting for risk by retaining some risk?

In risk management, which technique involves budgeting for risk by retaining some risk?

• A. Retention
• B. Avoidance
• C. Risk transfer
• D. Safety & loss control

Answer: (A)

Retention is the deliberate choice to keep and fund a portion of potential losses rather than transferring or avoiding them. It involves budgeting for risk by setting aside reserves or self-insuring so that the organization can absorb some losses itself. This approach is chosen when the expected cost of losses is modest or when transferring the risk (through insurance or contracts) is more expensive than bearing it, or when the organization wants to maintain flexibility. It differs from avoidance, which eliminates the risk entirely; from risk transfer, which shifts the loss to another party; and from safety and loss control, which aims to reduce the likelihood or impact of losses rather than fund them.

Retention is the deliberate choice to keep and fund a portion of potential losses rather than transferring or avoiding them. It involves budgeting for risk by setting aside reserves or self-insuring so that the organization can absorb some losses itself. This approach is chosen when the expected cost of losses is modest or when transferring the risk (through insurance or contracts) is more expensive than bearing it, or when the organization wants to maintain flexibility.

It differs from avoidance, which eliminates the risk entirely; from risk transfer, which shifts the loss to another party; and from safety and loss control, which aims to reduce the likelihood or impact of losses rather than fund them.