What is the term for the risk management strategy that reduces the chance or severity of potential loss?

The term "risk reduction" refers to the strategy aimed at minimizing either the likelihood of a risk occurring or the impact it could have if it does occur. This approach involves implementing measures that can lessen the severity or probability of a loss, such as adopting safety protocols, using protective equipment, or enhancing security measures.

By focusing on risk reduction, individuals and organizations actively work to create a safer environment or scenario, thereby lessening the potential for adverse outcomes. This could include diversifying investments to reduce financial risks or improving building codes to minimize property damage from natural disasters. Such proactive measures are essential in effective risk management and underscore the importance of being prepared for various challenges while striving to mitigate their effects.

In contrast, other options reflect different strategies in risk management. Risk retention involves accepting the potential loss and managing it internally, risk avoidance means eliminating the risk altogether by not engaging in the activity, and risk transference shifts the risk to another party, such as through insurance. Each of these approaches serves specific situations, but risk reduction focuses directly on minimizing the likelihood and severity of risks.