Accredited Residential Manager (ARM) Certification Practice Exam

Retention in risk management refers to the strategy where an individual or organization chooses to accept a certain level of risk without taking any specific actions to reduce it. This approach suggests that the potential consequences of the risk are manageable within the organization’s capabilities or that the costs of mitigating the risk outweigh the potential impact it might have.

By retaining risk, the organization acknowledges that the risk exists, but decides to absorb any adverse effects rather than transfer the risk or eliminate it entirely. This can be a strategic choice based on an understanding of the specific risks involved and the confidence in the organization’s ability to handle potential consequences.

In contrast to the other options, retention does not involve transferring the risk (which would be managing risk by moving it to another party) or taking actions to lower the risk impact. It also does not imply a complete elimination of risk, which is often impossible in many situations, nor does it suggest the use of insurance as a means of mitigating risk.