A berm built to divert water away from a house is an example of which risk management technique?

A berm built to divert water away from a house is an example of which risk management technique?

• A. Mitigation
• B. Risk transfer
• C. Loss prevention
• D. Risk avoidance

Answer: (C)

Loss prevention is about taking steps that lower the chance of a loss occurring. Building a berm to divert floodwater away from the house reduces the likelihood that flood damage will happen, so the focus is on preventing the loss before it occurs. In contrast, mitigation aims to lessen damage after a loss happens, risk transfer means paying to shift the financial burden (like insurance), and risk avoidance would be removing the exposure entirely (not building in a flood-prone area).

Loss prevention is about taking steps that lower the chance of a loss occurring. Building a berm to divert floodwater away from the house reduces the likelihood that flood damage will happen, so the focus is on preventing the loss before it occurs. In contrast, mitigation aims to lessen damage after a loss happens, risk transfer means paying to shift the financial burden (like insurance), and risk avoidance would be removing the exposure entirely (not building in a flood-prone area).