XYZ Corporation, a multinational manufacturing company, is considering a significant investment in a new production facility. The capital budget for this project involves substantial financial commitments, and the management recognizes the importance of conducting a comprehensive risk analysis before making a final decision.

**Risk Identification:** The first step in the risk analysis process is identifying potential risks associated with the project. XYZ's management team, in collaboration with financial analysts, identifies factors such as economic uncertainty, regulatory changes, and supply chain disruptions as potential risks. They also consider project-specific risks, including technology obsolescence and unexpected construction delays.

**Quantitative and Qualitative Assessment:** Once risks are identified, XYZ employs a mix of quantitative and qualitative methods to assess their potential impact. Financial modeling is used to simulate the impact of economic changes on the project's cash flows. Qualitative assessments involve expert opinions and scenario analysis to gauge the effect of unforeseen events on the project's success.

**Risk Mitigation Strategies:** With a clearer understanding of potential risks, XYZ's management develops risk mitigation strategies. This includes diversifying suppliers, negotiating fixed-price contracts, and establishing contingency funds to address unexpected costs. Additionally, the company explores insurance options to mitigate the financial impact of certain risks.

 In the risk analysis process for XYZ Corporation's capital budgeting, what is a key strategy employed to address potential risks?*