DEFINITION of 'Accepting Risk'

A risk management method used in the business or investment field. Accepting risk occurs when the cost of managing a certain type of risk is accepted, because the risk involved is not adequate enough to warrant the added cost it will take to avoid that risk.

BREAKING DOWN 'Accepting Risk'

Many businesses use risk management techniques to correctly identify, assess and prioritize risk, in order to effectively minimize, monitor and control the risk, in addition to finding out how the risk will increase the expense involved in avoiding it. Types of risks include uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters, and overly aggressive competition.

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