A manufacturer removes a dangerous machine from its factory floor rather than keeping it and installing guards and training staff. The removal and the guards-plus-training are, respectively, examples of:

Why A is correct

Removing the machine eliminates the exposure entirely, which is risk avoidance — the only technique that removes the possibility of loss. Keeping the machine but adding guards and training does not eliminate the exposure; it reduces the frequency or severity of potential injuries, which is loss reduction (also called loss control). The two techniques operate at different points: one deletes the risk, the other shrinks it.

Why the other options are wrong

• B) Retention means bearing the loss; guards and training do not involve bearing losses, they reduce them.
• C) Transfer shifts loss costs to another party; neither removal nor guards and training shift costs to an insurer.
• D) Sharing spreads losses among a group; removal eliminates the exposure rather than sharing it, and guards and training are reduction, not avoidance.

Memory hook

Avoidance = tear it out, risk gone. Reduction = bolt it down, risk smaller. Delete versus shrink.