Risk avoidance
Risk avoidance chooses not to start, or to discontinue, an activity that gives rise to an exposure. It can be appropriate where the exposure exceeds appetite or cannot be managed acceptably. The decision still has costs and consequences, including foregone opportunities and risks associated with alternatives. Avoiding one activity therefore does not eliminate all uncertainty from the organisation.
Worked example
A company decides not to enter a market because the identified legal and safety exposures exceed its acceptable limits. It gives up the potential revenue and reassesses how else to meet its growth objectives.
Common mistake
Do not treat avoidance as automatically the best option for every high-impact risk. Consider strategic purpose, available treatments and the consequences of not proceeding.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBL | Direct | September 2026–June 2027 |