Risk mitigation planning is a process where options and actions are developed to enhance opportunities and reduce any existing or potential threats to the objectives of a project or organization. The process of implementing these actions is known as risk mitigation implementation.
It is important to note that there is a difference between a risk management plan and a risk mitigation plan. The former is the framework for all matters related to risks such as risk identification and verification while the latter refers specifically to plans made to mitigate risks.
Why risk mitigation matters
Risk mitigation and all the process related to risk management are important because otherwise, an organization would not be able to define its objectives for the future. In recent times, economic turmoil has changed the way companies operate. Where organizations could rely on forecasts and projections to make decisions, today they have to factor in another major factor and that contribute to risk.
Risk mitigation strategies
Effective risk management makes all the difference in helping a company stay on course and carve out new paths so that they can do more and do better. An organization can employ a number of strategies to mitigate the risks they are facing. The strategies should be selected depending on the particular circumstances of an organization such as the chances of a potential risk becoming an actual one and severity of the consequence of an actualized risk.
The strategies are:
Assume and Accept
With this strategy, an organization acknowledges a specific risk and then makes a decision to accept it and work around it rather than trying to control it.
Watch & Monitor
This strategy involves keeping a watchful eye on an area, market conditions or other specifics regarding how it may affect the activities of an organization.
With avoidance, an organization makes provisions to avoid a risk. This could be postponing or canceling an event, changing a venue, adding or removing certain people or organizations from a guest list or other some adjustment.
Limitation is the risk management strategy that is used by most businesses. It involves limiting exposure to a particular risk by taking preventative steps. A common example of this is a business choosing to remain closed in an area where riots are going on or where potentially fatal weather conditions like a storm or flood are anticipated.
A business could also mitigate the risk of having unsellable stock by holding an auction to sell old stock that will soon be obsolete such as an old model of computers. A decision could also be made to reduce prices or give special offers such as buy two get one free. All these measures would limit the risk of a business incurred a loss through old or bad stock.
Risk buffering or risk hedging involves establishing a reserve or buffer so that should a possible risk become actual, then an organization can absorb its impact without getting off track with its operations.
Buffering measures can be putting reserve funds for a fund in case the cost of completing it rises. It can also be allocating more time, machines, equipment or people for a project just in case they will be needed.
This form of risk mitigation is often used by those who take on long-term projects and those who work with a large workforce such as constructors.
With risk control, an organization identifies a risk and takes steps to minimize its impact. Examples of control measures are installing advanced security seasons to control the risk of premises being broken into or otherwise compromised following reports of increased theft incidents in an area. Another example would be installing employee performance monitoring software to round-up on low or non-performing employees if it has been established that they are compromising operations.
This last mitigation strategy is all about transferring risk to a third party with their full knowledge and consent. A good example is companies outsourcing services such as their customer care or accounting functions like payroll services. The companies to whom these services are outsourced bear the risk in the event of potential risks becoming actualized.
This would be an accounting failing to file tax returns correctly or on time or a delivery firm failing to deliver a purchase to a customer when indicated or delivering the wrong product. The outsourced company would have to bear the cost of correcting the wrongs.
Best practices for mitigating risks
Best practices depend on the particulars of an organization; the industry it is in, the state of the market in the recent past, competitors and the strategies they are using and the present and anticipated state of the economy.
The key to getting it right is bringing in an expert with a proven track record in creating risk mitigation.strategies. An expert or a company that has experience in a particular sector or industry would be the ideal.