What does 'Risk Retention' imply?

'Risk Retention' implies accepting and managing risk within the organization. This approach means that an organization acknowledges the potential for loss or adverse outcomes and decides to bear that risk rather than transferring it entirely to another party or mitigating it through other means.

By actively managing retained risks, organizations can develop strategies to handle potential ramifications. This can include setting aside financial reserves, implementing preventive measures, or creating contingency plans. The focus is on understanding the nature of the risks and preparing to address them internally rather than outsourcing that responsibility.

In contrast, the other options involve different strategies, such as transferring risks to other parties or attempting to eliminate risks entirely, which does not align with the definition of risk retention. Retaining risk is a pragmatic approach within the framework of risk management, emphasizing a balance between risk exposure and organizational capacity to respond.