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4 Examples of Risk Avoidance

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Risk avoidance is a risk treatment that avoids, sidesteps or discontinues the actions that trigger a particular risk. The following are a few examples:

Business Strategy

A bank considers expanding its products to include financial derivatives. After completing a business plan, the bank determines that the plan is risky and decides not to pursue the strategy.

Investing

An investment adviser recommends a stock to a client. The client reads the company's most recent financial report and finds it's a complex business with difficult to understand risk factors and decides against the investment.

Health & Safety

A company shuts down a construction site in bad weather to avoid the risk that someone will get hurt.

Information Security

A retailer discontinues collection of personal data such as customer's ages and telephone numbers to avoid the risk that such data would be stolen in an information security incident.

Risk Avoidance vs Risk Mitigation

Risk avoidance is the process of not taking an action in order to avoid the risks associated with that action. Risk mitigation is the process of taking an action but also taking steps to reduce the risks associated with that action.
Strategy
Example
Risk Avoidance
Do not collect or store customer information in any file, system or database in order to completely avoid data privacy risks.
Risk Mitigation
Store customer information in a database and mitigate data privacy risks with a robust compliance and cybersecurity risk management program.

Summary

Risk avoidance is a risk management strategy that completely sidesteps a risk by not pursuing the actions that create the risk. Interestingly, this is not risk free because risk avoidance can cause secondary risks. In other words, every action and inaction is surrounded in risk such that risk can't be completely avoided. For example, if you avoid the risk of crossing the street you may create secondary risks such as the risk that lightning will hit the place where you are standing.
Overview: Risk Avoidance
Type
Definition
Choosing to avoid actions that trigger a risk.
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