What method involves forming a group to share losses among its members?

The method that involves forming a group to share losses among its members is pooling. Pooling is a risk management strategy where individuals or entities come together to collectively cover potential losses. In this arrangement, each member of the group contributes to a fund, which is then used to pay for any losses incurred by any member of the group. By sharing the financial burden, pooling helps to mitigate the impact of large losses on any single member, leading to a more stable financial outcome for the group as a whole.

Pooling is particularly common in insurance, as it allows participants to manage risk more effectively through shared resources. This collective approach can be more efficient and sustainable, especially for risks that can be difficult or expensive for individuals to cover on their own.

The other options represent different risk management strategies that do not involve the collective sharing of losses. Transferring involves shifting risk from one party to another, usually through purchasing insurance. Avoiding means taking steps to eliminate the risk entirely, while retaining refers to keeping the risk within the organization and assuming responsibility for any potential losses. Each of these methods has its own use cases, but pooling specifically deals with the communal sharing of risk.