Risk mitigation is a critical aspect of business operations that involves identifying, assessing, and reducing potential negative impacts of risks or threats to an organization.
Without proper planning for risk and implementing measures to mitigate it, a business is vulnerable to various disruptions and damages.
Examples of potential threats to a business include cyber-attacks like ransomware, natural disasters such as hurricanes or wildfires, and even health crises like the COVID-19 pandemic.
While some risks may be unavoidable, having a risk mitigation plan in place allows a company to effectively confront various threats, minimize damages, and restore operations as quickly as possible.
The goal of risk mitigation is to minimize the likelihood and/or impact of risks by implementing various strategies and techniques, such as avoiding the risk, transferring the risk, mitigating the risk or accepting the risk.
Some of the examples of risk mitigation are having a disaster recovery plan, providing regular cyber security training, or having a continuity plan in case of pandemics.
Risk Mitigation Strategies
Risk mitigation is the process of identifying, assessing, and reducing the potential negative impact of risks or threats to an organization. The goal of risk mitigation is to minimize the likelihood and/or impact of risks by implementing a variety of strategies and techniques.
Risk mitigation strategies can include:
1. Avoiding the risk: eliminating or avoiding the risk altogether by making changes to the way the organization operates.
2. Transferring the risk: transferring the risk to a third party, such as by purchasing insurance.
3. Mitigating the risk: reducing the likelihood or impact of the risk through risk management techniques such as implementing controls or procedures.
4. Accepting the risk: when the cost of mitigating the risk outweighs the potential impact, the risk may be accepted and a plan developed to respond to it if it occurs.
There are different methodologies to conduct risk management, one of the most common is ISO 31000. This standard provides guidelines and general principles for initiating, implementing, maintaining, and improving risk management in organizations.
Risk Mitigation Plans
An effective risk mitigation strategy is essential for any organization in order to anticipate and prepare for potential risks that could disrupt business operations.
The key components of an effective risk mitigation strategy include identifying likely risks, prioritizing risk preparation and responses, and monitoring and updating the risk mitigation plan.
1. Identifying possible risk events
The first step in developing a risk mitigation strategy is to identify potential risks that could affect the organization. This includes natural threats based on the organization’s location, as well as potential risks to data, operations, and personnel.
2. Risk assessment
Once potential risks have been identified, the next step is to evaluate the potential of each risk. This includes determining what measures, controls, and processes are needed to reduce the impact of a potential threat.
This involves identifying the likelihood and consequences of the risk, and determining the impact it would have on the organization if it were to occur.
3. Prioritizing risks
After conducting a risk assessment, the next step is to rank risks by their severity and potential impact on the organization.
This helps the organization determine how many resources to devote to addressing each potential threat. It also helps to focus on the most critical risks first.
4. Tracking risks
It is important to continuously monitor risks as they evolve and evaluate the risk mitigation plan’s ability to address them.
This includes implementing actions to address the identified risks and assessing progress in addressing them.
If necessary, the risk mitigation plan should be revised to better address evolving risks and ensure that the organization is prepared to respond effectively to potential threats.
Risk Mitigation Best Practices
In addition to the various options for handling risks, there are several best practices for risk mitigation that organizations should consider implementing. These include:
1. Determining mitigation plans
The development of a risk mitigation strategy should be a mission decision, involving decision-makers and key stakeholders from across the organization.
It is important to recognize that risks can recur and plans to address them should be ready and in place.
2. Mitigation plan content
A designated risk manager should be selected, who has the necessary resources, knowledge, and authority to implement the risk mitigation plan.
The plan should include specific actions that need to be taken, timelines for when these actions should be accomplished, and clear responsibilities for who is responsible for taking action.
It should also include information on the resources needed and how the actions will reduce the risk’s probability or severity.
3. Developing a contingency plan
For high-risk situations, it may be necessary to have a contingency plan in place in case initial actions fail to provide adequate mitigation.
This should include a trigger or timeline for when the contingency plan will be implemented, such as evacuating operations and setting up in another location.
4. Evaluating the status of each action
It is important to determine when each step of the risk mitigation plan needs to be implemented and completed, in order to ensure that the plan is being followed and that actions are being taken in a timely manner.
5. Monitoring risk
Organizations should continuously track evolving threats and amend their strategies and actions as necessary.
Additionally, it is important to continually reassess the organization’s risk exposure in order to ensure that the risk mitigation plan remains effective and relevant.
Risk Mitigation Training
1. General Business
- Building a Culture of Risk and Compliance
The training will explore how to build cultural awareness so that companies can help maintain healthy business continuity.
- Operational Risk Management & Assurance Framework (ORMAF)
This training is designed to increase awareness regarding operational risk from every activity carried out by the company.
2. Information Technology
- Information Technology (IT) Risk Management
This training teaches the overall information technology risk management framework, commonly known as the IT enterprise risk management (ERM) framework.
- Fintech P2P Lending Risk Management
This training discusses the link between traffic transactions conducted by fintech p2p lending and the banking sector, as well as cases related to money laundering and financing of terrorism.
3. Banking & Financial Industry
- Bank Operational Risk Management
This training is designed to deal with crimes against banking. Participants will be trained to apply risk management in their workplace.
- Optimization of Insurance Risk Management
This training provides an understanding of creating and implementing structured and systematic risk management using existing resources.