The statement 'Responding to risk through risk avoidance is likely to be acceptable to other units of the firm' is true or false.

• A. True
• B. False
• C. Mostly true
• D. Depends on context

Answer: (B)

The main idea tested is how organizations choose risk response strategies and what is usually expected across different units. Risk avoidance eliminates the risk by not engaging in the activity, but that often comes at a cost to business objectives—lost opportunities, halted projects, or curtailed growth. In a real firm, other units are typically charged with pursuing objectives and delivering value, so they’re more likely to push for maintaining or transforming activities rather than stopping them entirely just to avoid the risk. They would prefer approaches that still enable operations and opportunities, such as reducing the risk to an acceptable level, transferring it, or accepting it if the potential reward justifies the exposure. Because avoidance is so blunt and can undermine strategic aims, it isn’t generally accepted as a likely or universal response across the organization. There are contexts where avoidance might be appropriate, but as a broad claim about what’s acceptable to other units, it’s not accurate.