Senior Professional in Human Resources (SPHR) Certification Practice Exam

Increasing field employee pay to remain competitive in the market is an example of which risk management strategy?

1. Mitigation

2. Avoidance

3. Acceptance

4. Transference

The correct answer is: Mitigation

Increasing field employee pay to remain competitive in the market is a clear demonstration of the mitigation strategy in risk management. This approach focuses on reducing the risk associated with employee turnover and ensuring that the organization can attract and retain skilled workers. By offering competitive pay, the organization is directly addressing the potential risk of losing talent to competitors who may offer better compensation. Mitigation aims to lessen the impact of risk factors, and in this case, by enhancing employee compensation, the organization is proactively managing the risk of staffing challenges that could arise from higher employee attrition rates. The other strategies such as avoidance, acceptance, and transference do not directly apply to this situation. Avoidance involves eliminating risk altogether, acceptance means recognizing and preparing for the risk without taking action to change it, and transference entails shifting the responsibility for a risk to another party. Therefore, the strategy of mitigation aligns perfectly with the action of increasing employee pay to improve job satisfaction and retention.