What does "risk avoidance" involve?

"Risk avoidance" is a strategy that seeks to eliminate the possibility of a risk occurring by removing the activities or situations that give rise to that risk. This approach is fundamental in risk management as it directly addresses the sources of potential negative outcomes by choosing not to engage in activities that could lead to undesirable results. For example, if a company identifies a potential risk associated with a particular business venture or project, they might decide to discontinue that venture altogether in order to avoid facing the associated risks.

In contrast, other options such as reducing the impact of the risk, sharing the risk with a third party, or controlling the risk through monitoring do not eliminate the risk itself. Instead, these strategies focus on mitigating or managing the risks that have already been identified. Therefore, while all these strategies are important in a comprehensive risk management plan, risk avoidance is distinct in its proactive approach to completely sidestep potential risks by altering decision-making or operational processes.