What is the act of avoiding or eluding risk referred to in risk management?

The act of avoiding or eluding risk in risk management is known as avoidance. This strategy involves identifying potential risks and deciding not to engage in activities that could lead to those risks materializing. By doing so, an individual or organization effectively reduces the possibility of experiencing adverse outcomes associated with those risks.

In practice, avoidance can mean discontinuing a project, not pursuing a particular business venture, or taking steps to eliminate certain risks completely. This is often a proactive approach in risk management, aiming to eliminate exposure to hazards that can lead to loss or negative consequences.

The other terms in the context of risk management refer to different strategies. Transfer involves shifting the risk to another party, typically through insurance. Adverse selection refers to a situation where those at higher risk are more likely to purchase insurance, which can lead to imbalances in risk pools. Mitigation involves taking steps to reduce the severity or impact of risks rather than entirely avoiding them. Each of these strategies serves different purposes in managing risk, but avoidance specifically pertains to completely evading the risk altogether.