What is the primary objective of risk management?

The primary objective of risk management is to adjust risk to an appropriate level. This approach acknowledges that while risks are inherent in any investment or business activity, it is often not feasible to eliminate all risks entirely. Instead, effective risk management involves identifying, assessing, and prioritizing risks, followed by implementing strategies to control or mitigate these risks to a level that is acceptable in light of the organization's risk tolerance and objectives.

By adjusting risk, organizations can ensure that they are not taking on excessive risk that could jeopardize their financial health, while still pursuing opportunities for reward. This involves a balance where some risks may be accepted, others mitigated through various strategies (like diversification or hedging), and some transferred to third parties (such as through insurance or contracts). Ultimately, the goal is to optimize the risk-return profile of investments or operations rather than simply focusing on the elimination of all risks, which is unrealistic.

Thus, this option reflects a comprehensive understanding of risk management within the context of investment and business strategy, emphasizing a proactive approach to risk rather than a reactive one.