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Difficulty: EasyMethods of Handling Risk

Sarah is considering adding a large trampoline to her backyard for her children. However, after learning about the high potential for severe injuries and expensive liability claims, she decides not to purchase the trampoline at all. By completely refusing to engage in the activity that creates the exposure, Sarah is utilizing which method of handling risk?

  1. Risk avoidanceAnswer
  2. B
    Risk reduction
  3. C
    Risk retention
  4. D
    Risk transfer

Answer

Risk avoidance
The correct answer accurately identifies that completely eliminating a risk by refusing to undertake the hazardous activity is defined as risk avoidance. Because the trampoline is never purchased, the specific liability and injury risks associated with it are completely avoided.

Step-by-Step Solution

1
Analyze the scenario to determine how the individual interacts with the potential risk.
Sarah decides not to purchase the trampoline, meaning the hazard is never introduced.
Identifying the specific action taken helps classify the risk management technique.
2
Match the action to the STARR framework (Sharing, Transfer, Avoidance, Reduction, Retention).
Completely refusing to engage in an activity that creates an exposure defines Avoidance.
This is the only method that eliminates the possibility of the specific loss occurring.

Key Concept

Risk Avoidance
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Topics

Methods of Handling Risk

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