Which of the following is a basic approach to handling risks?

• A. Risk finance
• B. Risk transfer
• C. Risk avoidance
• D. Risk acceptance

Answer: (A)

The main idea here is that risk financing focuses on how losses will be paid for, providing the funds needed to cover those losses even after risk controls or transfers are in place. This is a fundamental part of managing risk because you can’t assume losses won’t happen; you must have a plan to fund them. In aviation risk management, financing options include insurance, self‑insurance, captives, reserves, and other funding mechanisms that ensure losses don’t cripple operations or solvency.

Risk financing is the best answer because it addresses the financial sustenance of the program—how to fund any remaining or unavoidable losses. While transferring risk to another party, avoiding the activity, or choosing to retain risk are valid approaches, they don’t by themselves ensure there are resources to pay for losses when they occur. Financing provides that essential funding layer, making it a basic approach to handling risk.