Which one of the following risk management techniques does a firm practise when it chooses self-insurance instead of submitting claims to an insurance company?

Question

Quizplus · Accepted Answer

When a firm chooses self-insurance, it is practising risk retention. This means that the firm is choosing to retain the risk and the potential financial impact of losses instead of transferring it to an insurance company. This can be a cost-effective strategy for firms that have a low frequency of losses and high cash reserves. Risk transfer (A) involves shifting the risk to another party, such as an insurance company, and paying them to take on the risk. Risk avoidance (B) involves taking actions to eliminate the risk entirely. Risk control (D) involves taking actions to reduce the frequency or severity of losses. Risk shift (E) is not a recognized risk management technique.

Which One of the Following Risk Management Techniques Does a Firm