Pure risk is a category of risk where the only possible outcomes are loss or no loss; there is no opportunity for financial gain. A fire in a manufacturing line is a classic example of a pure risk. If the fire occurs, the organization suffers a loss (e.g., damaged equipment, business interruption). If the fire does not occur, the organization's state remains unchanged (no loss). The other options represent speculative risks, which are taken on voluntarily and involve three potential outcomes: loss, no loss, or gain. These are typically associated with business or financial decisions.

B. entering into a contract to purchase a new factory.

This is a speculative risk. The purchase is an investment made with the expectation of gain (profit), but it also carries the risk of financial loss.

C. making a strategic decision that affects the long-term future of the organisation.

This is inherently a speculative risk. Strategic decisions are undertaken to achieve positive outcomes (gain), but they always involve uncertainty and the possibility of negative consequences (loss).

D. the purchase of a currency derivative.

This is a financial or speculative risk. Derivatives are used to either speculate for a profit (gain) or to hedge against a potential loss, both of which involve possibilities beyond just loss/no loss.

1. Rejda, G. E., & McNamara, M. J. (2017). Principles of Risk Management and Insurance (13th ed.). Pearson. In Chapter 1, "Risk and Its Treatment," the text defines pure risk as "a situation in which there are only the possibilities of loss or no loss" (p. 6). It contrasts this with speculative risk, which involves the possibility of profit or loss.

2. Vaughan, E. J., & Vaughan, T. (2013). Fundamentals of Risk and Insurance (11th ed.). John Wiley & Sons. Chapter 1, "The Problem of Risk," distinguishes between pure and speculative risk, stating, "Pure risk involves the chance of loss or no loss only... Speculative risk describes a situation where there is a possibility of loss but also a possibility of gain" (p. 8).

3. University of Georgia, Terry College of Business. (n.d.). RMIN 4000: Risk Management and Insurance Courseware. The curriculum defines pure risks as those that are "loss or no loss" situations, typically related to accidental or unforeseen events like fires, floods, and accidents, which are often insurable. Speculative risks are defined as those involving a chance of gain, such as investment and strategic decisions.