Which method involves mitigating a risk by implementing measures to lessen its impact?

The method of mitigating a risk by implementing measures to lessen its impact is known as risk reduction. This approach focuses on identifying potential risks and then taking proactive steps to minimize the likelihood of their occurrence or the severity of their effects if they do occur.

For example, if a company recognizes that there is a risk of data breaches due to insufficient cybersecurity measures, it can implement stronger encryption, regular software updates, and employee training programs to reduce that risk. The emphasis is on taking corrective actions and improving security controls to protect against potential threats effectively.

In contrast, the other methods address risks differently. Risk spreading involves diversifying risk across different areas or portfolios to reduce the impact. Risk avoidance entails completely eliminating a risk, which may not always be practical or feasible. Risk transfer shifts the burden of risk to another party, like through insurance, rather than directly mitigating the risk itself. Thus, risk reduction is specifically aimed at directly diminishing the potential impact of identified risks.