The correct answer is: D. None of the three
Retention of risk is the act of keeping the risk of loss or damage to an asset or property. It is a common practice among businesses, as it can be more cost-effective than transferring the risk to another party. However, retention of risk is not without its risks. If the asset or property is lost or damaged, the business will be responsible for the loss.
Large corporations are often able to retain risk more easily than small companies or individuals. This is because they have more resources to cover losses, and they may be able to spread the risk over a larger number of assets. However, even large corporations can be exposed to significant losses if they retain too much risk.
Small companies and individuals are often less able to retain risk than large corporations. This is because they have fewer resources to cover losses, and they may not be able to spread the risk over a larger number of assets. As a result, they may need to transfer risk to another party, such as an insurance company.
In conclusion, retention of risk is a complex issue that should be carefully considered by businesses of all sizes. There is no one-size-fits-all answer to the question of whether or not to retain risk. The best approach will vary depending on the specific circumstances of the business.
Here is a brief explanation of each option:
- Large corporations can retain risk more easily than small companies or individuals because they have more resources to cover losses. They may also be able to spread the risk over a larger number of assets. However, even large corporations can be exposed to significant losses if they retain too much risk.
- Small companies and individuals are often less able to retain risk than large corporations. This is because they have fewer resources to cover losses, and they may not be able to spread the risk over a larger number of assets. As a result, they may need to transfer risk to another party, such as an insurance company.
- None of the three can retain risk without taking on some level of risk. The amount of risk that is taken on will vary depending on the specific circumstances of the business.