Which of the following defines retention in risk management?

Retention in risk management refers to the decision to keep the risk and its consequences within an organization rather than attempting to eliminate or transfer the risk. This approach is often taken when the potential consequences of the risk are manageable or when the costs associated with transferring or mitigating the risk exceed the potential impact of the risk itself.

In practice, retention involves recognizing a risk, assessing its potential impact, and deciding to tolerate it without seeking to transfer it elsewhere. Organizations may create financial reserves or implement plans to address any negative consequences that might arise, essentially preparing to absorb the losses if they occur. This strategy can be part of a broader risk management framework where risks are balanced according to the organization's risk appetite, objectives, and financial capabilities.

The other choices outline different risk management techniques: eliminating risk involves methods that completely remove exposure to a risk, transferring risk involves shifting the financial consequences of a risk to another party, often through insurance, and minimizing risk exposure focuses on strategies to reduce the likelihood or severity of risks but does not involve accepting them outright as retention does.