What is a risk management technique that prevents loss by not engaging in risky activities?

Avoidance is a risk management technique that involves eliminating the possibility of loss by choosing not to participate in activities that carry risks. This approach is particularly effective when the risk may lead to significant adverse consequences, allowing an individual or organization to steer clear of danger altogether.

For instance, a company might decide not to launch a new product if the market research suggests that it has a high probability of failing and causing financial losses. By opting out of this unfamiliar market venture, the company avoids the risks associated with potential product failure.

Other techniques are relevant in different contexts. Mitigation involves reducing the impact or likelihood of the loss through measures that lessen exposure to risks without avoiding the activity entirely. Transfer refers to shifting the financial burden of risk to another party, such as through insurance. Lastly, retention means accepting the risk and standing ready to manage the loss if it occurs. These techniques can complement avoidance but do not provide the same level of elimination of risk as avoiding the activity entirely.