What risk management technique will you choose in the following situations? a) Installing a smoke detector in your home b) Investing savings in T-Bills rather than stocks c) Deciding not to purchase collision insurance on your car d) Purchasing a life

In each of the situations you’ve presented, different risk management techniques are being employed. Here’s an analysis of each scenario and the corresponding risk management technique: a) **Installing a smoke detector in your home**: **Prevention/Reduction** This is a risk reduction technique, as it helps prevent or minimize the potential fire damage and enhances safety by providing early detection of smoke. b) **Investing savings in T-Bills rather than stocks**: **Risk Avoidance** This represents risk avoidance, as T-Bills are considered lower risk compared to stocks, which can be volatile. By choosing T-Bills, one avoids the higher market risks associated with stocks. c) **Deciding not to purchase collision insurance on your car**: **Risk Retention** Choosing not to purchase collision insurance means you are retaining the risk of potential car damage. This approach is typically chosen when an individual feels they can absorb the costs associated with potential accidents. d) **Purchasing a life insurance policy for yourself**: **Risk Transfer** This is a form of risk transfer, as you are transferring the financial risk associated with your death to the insurance company. In exchange for premiums, the insurance company pays out a benefit to your beneficiaries upon your passing. e) **Setting aside 2% of your annual profit each year into a ‘ring-fenced account’ only for the purpose of funding smaller losses as and when they occur**: **Risk Retention** This can also be considered a retention strategy, as you are retaining the risk by setting aside funds to cover potential smaller losses. It shows a proactive approach to managing expected risks. f) **Investing 40% of your savings in mutual funds and 60% in a restaurant business**: **Risk Diversification** This is a diversification strategy. By spreading investments across different asset classes (mutual funds and a restaurant business), you reduce the impact of poor performance in any single investment on your overall portfolio. In summary: - a) Prevention/Reduction - b) Risk Avoidance - c) Risk Retention - d) Risk Transfer - e) Risk Retention - f) Risk Diversification