Property and Casualty Insurance Practice Exam

Which of the following is NOT one of the methods for handling risk?

1. Transfer

2. Hold

3. Control

4. Avoid

The correct answer is: Hold

The method of handling risk that is not commonly recognized in risk management practices is holding. In risk management, the other methods—transfer, control, and avoid—are established strategies for dealing with potential risks. Transferring risk typically involves shifting the burden of risk to another party, such as through insurance policies. This means that while the risk remains, the financial liability associated with it is moved to an insurer. Controlling risk refers to implementing measures to reduce the likelihood or impact of risks. This can involve policies, procedures, safety measures, and loss prevention strategies aimed at mitigating exposure to potential threats. Avoiding risk entails eliminating the possibility of risk entirely, often by deciding not to engage in certain activities or taking alternative approaches that inherently carry less risk. Holding, while it could imply retaining risk, is not a standard term used to describe methods of handling risks in this context. The focus in risk management is typically on active strategies rather than passively holding or accepting risks without a clear plan or intention.