CAF-7 · Chapter 10 · Question 11 of 15
A business discovers that launching a controversial new product could potentially result in massive lawsuits that would bankrupt the firm. Management decides to completely scrap the product launch. This is an example of:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Risk Avoidance
Explanation
Risk avoidance involves completely avoiding the activity that gives rise to the risk. By scrapping the product launch entirely, the company ensures the risk of lawsuits from that product is zero.
More Financial Risk Management MCQs
- Q13What does the financial acronym 'KIBOR' stand for?
- Q14If a company purchases a Call option on an interest rate (an Interest Rate Cap), what protection does the company secure?
- Q15Why must the final settlement amount in a Forward Rate Agreement (FRA) be discounted back to present value using the reference rate?
- Q1Which of the following scenarios is a classic example of an operational (pure) risk rather than a strategic (speculative) risk?
- Q2According to the ISO 31000 risk management framework, which of the following is considered a core principle?