By deciding not to purchase insurance on their new properties, what practice is Six Stars Development Company engaged in?

Six Stars Development Company's decision not to purchase insurance on their new properties falls under the practice of risk retention. This concept refers to the decision to accept the risk associated with potential loss or damage rather than transferring that risk to an insurance policy. By not purchasing insurance, the company is choosing to retain the financial responsibility for any losses that may occur, rather than transferring that burden to an insurer. This approach often stems from a belief that the potential losses are manageable, or simply a cost-saving decision. It signifies that the company is prepared to absorb the consequences of risk in exchange for avoiding the cost of insurance premiums.

In contrast, other options represent different risk management strategies. Risk avoidance involves completely steering clear of an action that could lead to a loss, such as not engaging in a particular business venture. Risk transfer is the practice of moving risk to another party, typically through insurance, to protect oneself from potential financial losses. Risk reduction involves taking measures to minimize the likelihood or impact of a risk, such as implementing safety protocols. These alternate practices indicate different approaches to managing risk rather than retaining it as seen with Six Stars Development Company.