HKSI Paper 7 Financial risk management question: risk management technique

Answer: B. Risk avoidance

The four fundamental techniques are avoid, reduce, transfer and accept. Avoidance means not undertaking, or ceasing, the activity that gives rise to the risk, so the exposure disappears together with the income it would have earned. Harbour Securities closes the business line, so it avoids the risk. Reduction would keep margin lending but cut the exposure, for example with lower client limits or more collateral. Transfer would pass the loss to someone else, such as an insurer or a credit protection seller. Acceptance would keep the exposure and absorb any losses. Source: Standard risk management framework (risk treatment: avoid, reduce, transfer, accept) (as at October 2026).