Which of the following mitigation tactics could reduce economic risk?

• A. Reducing access to information for decision-makers
• B. Ignoring market trends and forecasts
• C. Concentrating all resources in a single market
• D. Diversifying investments across different industries

Answer: (D)

Verified step by step guidance

1. Understand the concept of economic risk, which refers to the uncertainty regarding the economic environment that can affect business outcomes, such as changes in market demand, interest rates, or economic policies.
2. Recognize that mitigation tactics aim to reduce exposure to such risks by managing uncertainty and potential losses.
3. Evaluate each option: reducing access to information for decision-makers increases uncertainty and risk, so it is not a mitigation tactic.
4. Ignoring market trends and forecasts removes valuable information needed for informed decisions, thus increasing risk rather than reducing it.
5. Concentrating all resources in a single market increases vulnerability to that market's fluctuations, so it does not reduce economic risk.
6. Diversifying investments across different industries spreads risk across multiple sectors, reducing the impact of adverse events in any one industry, which is a well-known strategy to mitigate economic risk.