When a company decides not to purchase insurance to cover a risk, it is pursuing what type of risk strategy?

Risk retention, also known as risk acceptance, is the strategy of acknowledging a potential risk and deciding not to take any action to avoid, reduce, or transfer it. When a company forgoes purchasing insurance, it is consciously deciding to absorb any potential losses itself. This is a deliberate form of self-insurance, where the company retains the financial responsibility for the risk's consequences. This strategy is often used for risks that are deemed to have a low probability or a low financial impact, making the cost of insurance premiums uneconomical.

B. Transfer: This is the opposite strategy; it involves shifting the risk to a third party, which is precisely what purchasing insurance accomplishes.
C. Mixed: A mixed strategy would involve combining multiple approaches (e.g., mitigating part of the risk and retaining the rest), which is not described here.
D. Mitigation: This involves taking active steps to reduce the likelihood or impact of a risk, such as installing safety equipment, not simply accepting the risk.

- APICS CLTD Learning System, Module 1, Section C, Topic 2: Risk Management. The text defines risk retention as the decision to accept the consequences of a risk, with a common example being the decision not to purchase insurance.

- Hollnagel, E., & Woods, D. D. (2017). Resilience Engineering in Practice: A Guidebook. CRC Press. Chapter 4 discusses risk management strategies, identifying retention as the deliberate acceptance of a risk and its potential outcomes without resorting to external mechanisms like insurance.