Which method of handling risk involves avoiding exposure to the risk entirely?

The method of handling risk that involves avoiding exposure to the risk entirely is known as avoidance. This strategy entails taking proactive measures to eliminate any potential risk factors or situations that could lead to loss or harm. For example, a company may decide not to engage in a particular business venture that it perceives as highly risky, thereby completely avoiding exposure to any associated loss.

In the context of risk management, avoidance is utilized when the potential negative outcomes far outweigh the benefits associated with the risk. By choosing not to participate in certain activities or decisions, individuals or organizations can protect themselves from potential harm or financial loss altogether.

The other methods, such as transfer, retention, and reduction, involve different strategies to manage risk but do not eliminate exposure as avoidance does. Transfer, for instance, involves shifting the risk to another party, like through insurance. Retention refers to accepting the risk and potentially bearing the costs incurred. Reduction focuses on minimizing the impact or likelihood of the risk occurring, but none of these approaches completely evade the risk itself as avoidance does.