What approach is exemplified when an individual accepts the risk of loss?

The approach exemplified when an individual accepts the risk of loss is known as retention. This method involves an individual or organization deciding to take on the risk rather than transferring it to another party, such as an insurance company.

By opting for retention, the individual acknowledges the potential for loss but demonstrates a belief that the risk is manageable within their means, whether through self-funding or reserves. This can often be more cost-effective for situations where the likelihood of loss is low or the financial impact is tolerable. This approach is often used in scenarios where the cost of insurance may outweigh the risks assumed, or when the individual prefers to maintain control over their financial exposure.

In contrast, avoidance would involve actions taken to eliminate the risk entirely, transfer pertains to shifting the risk to another entity, such as through insurance, and reduction involves implementing measures to decrease the likelihood of loss or its impact. Understanding these distinctions is crucial for making informed decisions in risk management.