What strategy involves minimizing or eliminating potential risks associated with an investment?

The strategy that involves minimizing or eliminating potential risks associated with an investment is accurately identified as risk avoidance. This approach focuses on identifying potential risks associated with a specific investment or business decision and either altering plans to avoid those risks entirely or choosing not to engage in the activity if the risks cannot be effectively managed.

Risk avoidance is proactive and aims to prevent risks from materializing in the first place. For instance, a company might choose not to invest in a volatile market where there are uncertainties that could undermine their financial stability. By sidestepping these risky areas, businesses can protect themselves from potential losses and enhance their overall investment security.

In contrast, other strategies such as risk management involve a broader range of tactics to identify, assess, and mitigate risks rather than outright avoidance. Risk tolerance refers to the degree of variability in investment returns that an individual is willing to withstand, and risk transfer often involves shifting the risk to another party, such as through insurance or outsourcing. These concepts are vital in financial decision-making but serve different purposes in how risks are treated.