For instance, a company might decide not to enter a politically unstable foreign market due to worries that they’ll have to pay bribes to government officials, or maybe even have their physical assets seized arbitrarily. Rather than risk loss or legal trouble, they avoid that nation altogether, even if it means passing up a growth opportunity.
While this can be effective in preventing losses, it also comes with trade-offs — namely, missed opportunities for innovation or growth. In fact, a company that avoids all risk is basically paralyzed, as it cannot launch new initiatives or seek new markets
Risk reduction
Risk reduction, sometimes referred to as risk limitation, aims to minimize, rather than eliminate, the likelihood or impact of potential threats. Under this strategy, enterprises implement safeguards — such as internal controls, redundancies, or safety protocols — to reduce its severity or frequency.
