Risk Mitigation

What is Risk Mitigation?

Risk mitigation is the strategy that organizations use to lessen the effects of business risks. It’s similar to the risk reduction process, wherein potential business threats are identified before the organization takes the necessary steps to lessen the effects of these factors.

This process involves developing a careful plan to identify and eliminate/mitigate the impact of potential risks in the workplace. Some of the threats and risks that modern organizations, businesses, and enterprises deal with include cybersecurity threats, natural disasters, and anything that may cause damage to the equipment, personnel, and facilities of an organization.

Why Is Risk Mitigation Important?

Risk mitigation is the process of understanding certain risks and threats, accepting that they exist, and taking the appropriate measures to reduce their effects in case they happen. It is a part of the risk management process and is necessary to prepare an organization for any threats to its operations and processes.

Instead of eliminating threats, risk mitigation focuses on the unavoidable threats and reducing their impact. This can include natural disasters and other threats that may cause issues in production and other processes.

These are threats that cannot be eliminated and are completely out of the company’s control. Risk mitigation is there so that if these events occur, the company has the right measures to ensure that the damage the organization sustains is kept to the bare minimum.

Types of Risk Mitigation

Risk mitigation isn’t a one-size-fits-all model. Each organization has its own take on it and its own approach to reducing the effects of certain unavoidable threats. However, some of the common techniques used for risk mitigation, which fall under the broader category of risk treatment,include:

Risk Transfer

This involves transferring the risk allocation between different parties. For example, if an organization gets materials or products from a third party supplier before distributing them, they can put all the risk for those certain materials in the hands of the third party instead.

Risk Acceptance

This involves accepting a certain risk and the threats it has for an organization for a certain period of time. The organization can focus on mitigating other risks and threats during this time.

Risk Avoidance

This is the strategy that an organization uses when the consequences of certain risks are too high for them to mitigate the risk. In these cases, it might be best for an organization to take measures to eliminate and avoid the risk altogether.

For example, if a certain process is deemed risky for safety and other reasons, risk avoidance would be not utilizing the process for worker safety.

Risk Monitoring

This involves keeping a close eye on different processes and teams to assess risks as they happen. From there, measures can be taken to minimize the effect of these risks.

Example

Risk mitigation is pre-emptive. A great example of this is when an organization practices regular and proper maintenance of its equipment. This way, there’s a smaller chance that their equipment breaks down. If the equipment breaks down for unavoidable reasons, regular maintenance can ensure that the damage isn’t too bad. It also makes sure that the repairs won’t be as costly compared to if the organization didn’t practice regular maintenance.

A Step-by-Step Guide to Risk Mitigation

The risk mitigation process can be fairly complex. Companies regularly face a wide range of different risks in their day-to-day activities. This is why a risk mitigation team is necessary for modern companies looking to comprehensively reduce the effects of certain risks.

While each company has its method and approach, most risk mitigation strategies follow similar processes. Here are some key steps organizations and teams use to mitigate risk.

Identifying the Risks

The first step in mitigating risks is understanding which risks are present in the first place. When identifying risks, it’s important to leave no stone unturned. So, aside from data risks and breaches, organizations need to consider natural disaster risks, mechanical risks, and everything involved with their process.

Additionally, all risk mitigation strategies must include the employee’s needs and safety. Before formulating a strategy for risk mitigation, risk identification is the first step organizations need to take.

Assessing Risks

Once the risks are laid out, it’s time for the team to assess the risk. During this phase, it’s important to quantify the risks and identify the risk levels of certain threats. This process also involves checking the measures and controls in place to reduce the effects of certain threats.

Prioritizing Certain Risks

Once the risks are properly leveled and quantified, the team can then figure out which risks to prioritize. Prioritizing certain risks is a key part of risk mitigation, as companies have to strongly emphasize the risks that can have the most detrimental effect on the organization, its processes, and its employees.

When the risk levels are properly assessed, the organization can easily determine which risks to prioritize and what measures are required to mitigate the risks. Which is why a project risk register can help teams keep this prioritization visible and up to date as new risks emerge throughout a project.

Monitoring Risks

Risks and risk levels can change depending on several factors. This is why monitoring and tracking the risks throughout the organization is important. That way, the team can determine when the severity of the risks increases and when measures need to be changed. Additionally, it also helps them stay compliant with different regulations in place to reduce risk.

Implementation & Adjustments

Once there is a proper plan for risk mitigation, the next step is to implement the plan throughout the organization. This involves placing all appropriate measures, briefing and training employees, and most importantly, making adjustments to the strategy as needed.

There’s a chance that there are some required changes after seeing the risk mitigation plan. It’s important to adjust when the team learns something new to ensure the safety of all employees and processes and the organization’s compliance with regulations.