What is risk mitigation?

Risk mitigation is a collection of strategies and tactics that reduce or eliminate the impact of threats to an organization. An element of the larger practice of risk management, the focus, implementation, and management of risk mitigation will vary by organization. However, risk mitigation should be a priority for every organization as it ensures business continuity.   

Risk mitigation strategies focus on many types of risk, including these five:  

1. Compliance risk
   Organizations typically have a number of compliance requirements that, if not followed, can result in fines or other penalties. 
2. Legal risk
   If laws are broken, organizations are subject to lawsuits, fines, and penalties. 
3. Operational risk
   The day-to-day activities required to run an organization are fraught with risks. Risk mitigation for operations addresses these internal and external risks, including disasters (e.g., cyber attacks, floods, fires, death, and plagues).
4. Reputational risk
   An organization’s reputation amongst its employees, customers, stockholders, and the general public is invaluable. A number of risk mitigation strategies can be enacted to protect it, including addressing gaps in security.  
5. Strategic risk
   Risk mitigation can be implemented to set up guardrails to stop organizations from making poor decisions or failing to plan for changes.  

Among the many reasons that risk mitigation is important are that it: 

• Brings an organization’s risk levels to a more tolerable level 
• Drives planning to manage, eliminate, or limit risks 
• Ensures that the correct measures are taken to keep the damage from threats to the bare minimum 
• Focuses organizations on unavoidable threats and reducing their impact 
• Helps avoid compliance failures 
• Reinforces trust in an organization 

What is risk mitigation planning? 

Risk mitigation planning marks the start of initiating a program.  

During risk mitigation planning, organizations identify, evaluate, prioritize, and define tactics for reducing or eliminating risk and monitoring efficacy. 

Key considerations for risk mitigation planning include: 

• Communicating the need for risk mitigation planning across the organization 
• Defining objectives for risk mitigation and key performance indicators (KPIs) 
• Securing support for risk mitigation efforts from decision-makers and executives 
• Ensuring that all stakeholders (e.g., employees, managers, partners, and vendors) are involved 
• Defining key roles and responsibilities clearly 

Types of risk mitigation strategies

The right approach to risk mitigation depends on the risk and the organization. Types of risk mitigation strategies that are commonly used, sometimes alone and others in combination, include the following. 

Acceptance

An acceptance approach sees organizations deciding that either the potential loss caused by a risk is deemed reasonable or the likelihood of it happening is very low. With this approach, organizations choose to monitor the risk and take action if it exceeds their parameters for acceptance.  

Often, an acceptance approach is taken as a first step, and organizations pivot to different risk mitigation strategies as situations change or more information becomes available. 

Avoidance

As a strategy, avoidance means that steps are taken to stay away from the risk or keep it from happening. This risk mitigation approach is taken in situations where the consequences of addressing risk are too high or severe (e.g., too costly or too dangerous). 

Reduction

A reduction risk mitigation strategy involves managing the cause or effect of the risk. It includes digging into the root causes of the risk, assessing early-warning indicators, and evaluating the scale and likelihood of the risk becoming an issue. Then, options for risk mitigation are considered, and steps are taken to control the risk rather than wholly eliminating it.  

This risk mitigation approach may be utilized for a number of reasons, such as the organization having a limited budget to address the risk, the likelihood that the risk is not severe, or steps that can be taken to reduce the impact of the risk to an acceptable level. 

Risk mitigation by risk avoidance	Risk mitigation by risk reduction
Used:  -If it is more practical to work around the risk than address it     -To prevent a particular risk from happening   -When the consequences of certain risks are too difficult or dangerous to eliminate	Used to:  -Decrease the likelihood that a risk will occur or the severity of the consequences   -Control a risk by managing its cause or effect  -Minimize the impact of an unavoidable risk

Transfer

Risk transfer entails moving risk to a third party. This is done in several ways, including procuring insurance against the risk or passing along the risk consequences as part of a contract or other agreement.   

Risk mitigation steps

Step one: Identify

• Determine what risk could impact a project or an organization’s broader operations. 
• Collaborate with all stakeholders to identify as many risks as possible. 
• Review past issues and known risks to quantify current risks. 
• Consider all risk types (e.g., compliance, legal, strategic, reputational, and operational).  
• Assess goals and objectives and consider what could impede them. 

Step two: Analyze

• Assess the nature of the risks. 
• Estimate the likelihood of their occurrence.  
• Quantify the negative impact.   
• Develop risk profiles with details about threat levels. 
• Determine time factors as part of the analysis.   

Step three: Prioritize

• Prioritize risks based on: 
  • The organization’s objectives. 
  • Importance to the organization. 
  • Likelihood to occur. 
  • Resources available to respond to the risk. 

Step four: Plan

• Evaluate the options available to treat or respond to the risks. 
• Decide which approach to apply to risks. 
• Outline control recommendations. 
• Detail assessment criteria to measure the efficacy of risk mitigation tactics. 

Step five: Treat

• Start with the highest-priority risks. 
• Record each risk, its category, and the mitigation approach. 
• Ensure that stakeholders understand the plan and which actions are being taken.  
• Execute the risk mitigation plan’s tactics. 

Step six: Monitor and measure

• Track all risk mitigation efforts, including time and resources employed. 
• Keep a close eye on accepted risks. 
• Measure the results of risk mitigation efforts. 

Risk mitigation is not one-size-fits-all

Risk is unavoidable. Failing to address it results in many types of problems that can cost the enterprise time and money as well as result in other losses. Risk mitigation strategies help avoid these issues. 

However, while the fundamental approach to risk mitigation is consistent across most organizations, the implementations will be nuanced. A one-size-fits-all model does not exist. Each organization has unique requirements driven by a variety of factors, such as size, industry, operations model, location, and workforce. 

Taking into consideration best practices and using basic risk mitigation principles, organizations can craft a model that fits their specific needs. Combined with securing the support of stakeholders and executives, this ensures that risk mitigation plans fit needs and workflows, which helps focus efforts to achieve optimal outcomes.