Risk mitigation is the process a business undertakes to reduce its exposure to the various risks it might face. Obviously businesses face many risks, some of which can cause severe disruption or financial loss. Mitigation is a prudent step every company should take to avoid such unwanted events.

More broadly, one could say that risk mitigation is one of the steps in risk management, which also includes identifying and analyzing risk. Then mitigation comes as the next step.

It’s not enough for an organization to assess and analyze the risks it faces; the organization must actually do something about those risks, too. A company can implement several risk mitigation strategies to deal with the different kinds of risk, including risk avoidance and risk reduction.

The main types of risks a company faces are strategic risk, compliance risk, operational risk, financial risk, and reputational risk. All of them need attention. This article will explore how to mitigate them successfully.

What Is Risk Mitigation Planning?

Risk mitigation planning is the process of identifying, evaluating, and selecting steps to take that will reduce a risk to levels that management deems acceptable. Risk mitigation planning will specify what should be done to reduce a risk, when it should be done, who does it, and what financing is necessary to put the risk mitigation plan into action.

What Are the Types of Risk Mitigation Strategies?

There are four primary risk mitigation measures, each one serves a unique role for various enterprises. As a result, choosing how to address risk is a subjective decision. Using risk management software and risk assessment matrices, you may be better equipped to analyze, monitor, and manage risk.

  • Acceptance. This strategy simply accepts the risk as it is, and the potential loss that might happen when it occurs. Risk acceptance is a reasonable option for minor risks where the cost of protecting against the risk would exceed the losses that might occur.
  • Avoidance. Avoidance is a strategy where you perform activities to avoid the underlying cause entirely. For example, rather than outsource a mission-critical process to a cloud-based vendor, you run the process in-house.
  • Transfer. Risk transfer entails passing the risk to a different third party or institution. For example, risky activities can be outsourced to a third-party, or you can take out an insurance policy to cover the costs of potential disruption.
  • Reduction. This happens when you manage the cause or effect of the risk. Implementing data-gathering or early warning systems that offer information to better estimate a risk’s impact, likelihood, or timing can be used to control risk.

Risk Avoidance vs. Risk Reduction

A risk avoidance strategy aims to eliminate a particular risk entirely rather than reduce its effect on the business. For example, tabling a project with a high risk enables a company to avoid that risk.

Another risk mitigation strategy is risk reduction, which reduces the likelihood that a risk will occur or decreases the severity of the consequences of the risk. One way to reduce risks is to implement controls.

A company could also use agile project management methods to review and reinforce strategies. Agile teams work to deliver value to the company by continuously reducing risk. Risk managers and business leaders could adapt agile project management techniques to meet their companies’ risk mitigation goals.

Get Ahead of Risk Management With Reciprocity ROAR

Risk management processes should be ingrained into your culture. While using manual risk management methods isn’t forbidden, manual processes are prone to mistakes and other obstacles that can result in costly repercussions.

The Reciprocity® ROAR Platform streamlines all the elements of risk management by providing complete views of control environments, quick access to information for risk assessment, and ongoing compliance monitoring procedures to handle critical tasks at any time.

Reciprocity ROAR uses its Risk Operations Center to give sophisticated dashboards and analytics that go beyond standard heat maps. Visualize, measure, and explain your risk posture in the context of the company’s priorities to assist executives and the board understand the risk implications of strategic choices.

Fast onboarding with a guided, content-rich approach, in-app scoring techniques, and target intrinsic risk scores will enable you to start monitoring your risk as soon as possible.

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