Why might an organization choose to retain certain risks?

An organization may decide to retain certain risks primarily because the exposure to those risks is assessed to be minimal or insignificant. This approach allows the organization to avoid the costs associated with transferring or mitigating those risks, particularly if the potential financial impact is low. Additionally, ownership motivation can play a role; some organizations prefer to retain risks as part of their operational strategy, especially when those risks are viewed as manageable or aligned with long-term goals.

The other options suggest practices that are either unrealistic or not generally aligned with effective risk management. Eliminating all risks is impossible and counterproductive, as some risks are inherent in business activities. While tax benefits can be a consequence of certain risk management strategies, the primary reason for risk retention is typically based on a calculated assessment of the risk's significance. Lastly, while increasing profitability through risk-taking is a potential outcome, it is generally not the primary rationale for retaining risks; effective risk management focuses more on understanding and managing risk exposures rather than merely taking on risks for profit.