Risk and Insurance Management Society (RIMS) Certified Risk Management Professional (CRMP) Practice Exam

Which term describes the acceptance of a certain level of risk?

1. Risk elimination

2. Risk avoidance

3. Risk acceptance

4. Risk sharing

The correct answer is: Risk acceptance

The term that describes the acceptance of a certain level of risk is risk acceptance. This concept involves recognizing that some risks are unavoidable and deciding to acknowledge and bear the consequences associated with those risks, rather than attempting to eliminate or avoid them. Organizations often assess risks based on their potential impact and likelihood. When the costs of mitigating a risk exceed the potential loss, or when the risk is deemed acceptable given the organization's risk tolerance, organizations may choose to accept it. This is a common strategy in risk management, as it allows organizations to focus resources on higher-priority risks while maintaining a balanced risk profile. In contrast, terms like risk elimination and risk avoidance refer to strategies that seek to completely eliminate or circumvent risks, which can be impractical in many situations. Risk sharing involves distributing the risk across multiple parties, rather than accepting it outright.