CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Risk Management
Kaveri Pharma Ltd. is considering entering a new overseas market where regulatory approval is uncertain. After assessment, the board concludes that the possible losses are far beyond its risk appetite and decides not to enter the market at all. Which risk treatment does this represent?
This is risk avoidance. The board removes the exposure entirely by choosing not to undertake the activity whose potential losses exceed the company's risk appetite, rather than sharing, retaining or reducing the risk while still proceeding with the overseas market entry.
- ARisk sharing
- BRisk avoidanceCorrect
- CRisk retention
- DRisk mitigation
Explanation
The board eliminates the exposure by not undertaking the activity. Sharing would involve a partner or insurer, retention means accepting the risk, and mitigation means reducing it while proceeding. None of those match deciding not to proceed.
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