What is another term for risk retention in risk management?

In risk management, risk retention refers to the practice of knowingly accepting the potential consequences of a risk, rather than transferring that risk to another party or avoiding it altogether. The term "Assumption of Risk" captures this concept well, as it implies that an individual or organization consciously decides to take on certain risks, understanding that they may face losses or negative outcomes as a result.

When an entity assumes risk, it often prepares for the possibility of loss by setting aside resources, establishing contingency plans, or simply acknowledging that they will handle any potential fallout directly. This contrasts with other strategies such as risk sharing, where risks are distributed among multiple parties, or risk transfer, which involves passing the risk to another entity, often through insurance. Risk avoidance, on the other hand, would involve taking steps to completely eliminate the risk or the activity that introduces the risk. By understanding that risk retention or the assumption of risk involves accepting the potential liabilities or consequences, risk managers can better prepare and mitigate adverse outcomes.