Which risk management technique focuses on lowering the impact of losses (severity) rather than transferring all risk to another party?

• A. Transfer
• B. Reduction
• C. Retention
• D. Avoidance

Answer: (B)

Reducing how bad a loss can be is a risk-control approach that lowers the severity of potential damage rather than shifting the risk to someone else. This technique uses safeguards, redundancies, training, and emergency plans to lessen the impact if an event occurs—for example, installing fire suppression, implementing data backups, or improving safety procedures. It differs from transferring risk (like buying insurance) where the financial burden is placed on another party, from avoiding risk (not engaging in a risky activity), and from retaining risk (accepting and absorbing the loss). Because the aim here is to minimize the damage that a loss can cause, this approach best fits the description.