What is Risk Mitigation

It is indeed a fact that risks are inevitable and any business that has not prepared itself to mitigate risk is on the brink at all times. It is advised that businesses should work towards the minimum risk exposure to the minimum, which will help them to remain competitive in the market. So today in this article we are going to cover everything about mitigating risk in the organization. We are going to see what risk mitigation definition, its types, its importance, and what are the best ways to implement the same in the company. This is a very broad area and a pivotal one at the same time too. So, if one is thinking of setting their foot in project management, then understanding what is risk mitigation becomes very important. Later, in the end, you can find the best platform where you can increase your acumen with a bunch of certifications for your bright career and go for pmp course.

Definition Of Risk Mitigation

Risk management is known as the identification, analysis, and response to the risk factors that are part of the given business. If the risk management is applied in the right way, then it will reduce threats and risks in the project and the timelines won’t be affected. There are many situations where the risks come in the future, but the team should be agile and prepared enough to deal with them and the team should be proactive. Therefore, effective risk management will not only help in the identification of potential risks but also help the team to reduce their impact if they may arise in the future.

The risk mitigation strategies include identifying, monitoring, and evaluating the risks along with the action plan that will be needed to deal with the issues in the project.

Importance of risk mitigation

Now if you are thinking about why this is so much important in the organization, then have a look at the below-mentioned points:

1.   If the plan is robust enough then it will help the team to establish the plan that will help in avoiding the risks, minimizing them and also reduce their impact on the team as well as on the whole organization.

2.   The right plan in place will help the organization to understand how it can bear and control the risk at the time of crisis. Keeping this in mind, the business will be able to make the objectives for their projects.

3.   If the picture is clear and the organization have risks under control, then they will be more confident and this will help them in making the right business decisions for their company.

4.   The risk mitigation plan will help the company to have crucial stability and it will also reduce the legal liability of the organization.

5.   The management will have all the necessary information that is needed for them to make an informed decision and this will ensure that the business are remaining profitable whatever comes its way.

6.   Along with all of the benefits mentioned above, it will protect the people who are involved along with the company from any harm in the future.

What are the types of risk mitigation strategies?

In general, there are four main types of risk mitigation strategies that we follow in the organization.

1.   Avoidance

2.   Reduction

3.   Transference

4.   Acceptance

Let us go through them one by one.

Avoidance

In this type of strategy, you will work towards the plan that will help in avoiding the risk from even occurring, This will require more time and you might need to compromise other resources or strategies so that you can make sure that you are doing everything in your knowledge to avoid the risks. This can be understood with the help of an example, you are facing a bottleneck in the project and that issue can be resolved only when there is a specialist in that particular domain but the one you have cannot come to work for some time. So you will need to hire someone. Of course, this is going to affect the budget, but you need to hire them so as to avoid any future risks for the project.

You won’t be in a position to compromise on this as you will not want to push project timelines because of the lack of resources. The main way that a company can follow this strategy is by going for the policies that will help them foresee the risks and draw policies to avoid them. Designing the products will help in eliminating possible risks and will be a step toward lesser risks in the future.

Reduction

There are many tools like FTA that are being implemented to reduce the risks that are identified in any organization. One of the natural outcomes that you are going to get from these tools is that there will be a reduction in the probability of occurrence or the severity of the consequences of these risks. If the reduction of these risks is getting very hard, then another road to take is by controlling them. These methods can be used to reduce unwanted events that could cause a problem during the use of the product or to know the root cause that might result in a potential risk in the future.

One of the ways to reduce or control the risk is diversifying. With the use of mixed products, various technologies, markets, supply chains, and operations, the team will be able to find the process that will help them to reduce the risk opportunities to an acceptable level. For example, if a product failure is detected, then it is best to stop the production line and try to find the issue. Acting promptly will help in reducing the impact of the risk to a manageable level.

Transference

In this kind of strategy, the impact of the risk and its consequences is being shifted to another party. In this type, you might need to give up some control and the impact will be shifted. But here if the product is associated with your brand then this might not protect your brand image. This can be understood with an example. If you have some failure in the product line, the supplier might pay for the repair cost and everything, but the product name is associated with your brand only. Therefore, it is advised to use this approach with caution. So what is this strategy all about?

Well, in this case, the best way to transfer risk to another organization is by using insurance. In this case, you might need to do a more careful analysis of the things that are impacted, but this is considered one of the viable options. Also, if you go for contract terms with various suppliers, vendors, and contractors, this might help the company in shifting the risk away from the company. This strategic way can work, but the proper analysis should be done.

Acceptance

Now, in the end, we have this strategy where we need to accept the risk as it is. This kind of strategy is being used when there is room for a chance and there is a possibility of reward outweighing the risk. In these kinds of risks, their possibility and the impact of the risk are very low and even negative. So, for the items that fall under the low-risk column for the company, the business develops an ongoing strategy to accept the risk. Now that the organization is going to accept the risk, it is pivotal for them to analyze if there are some changes that might happen in the risk assessment.  Also, the team should always keep in check the impact that the risk is going to have. If not, then this might become a consequence that could be hard to recover from.

Well, these are some kinds of risk mitigation strategies that help the company to reduce or avoid the impact of the risks that might come their way.

Steps needed to be followed to apply risk mitigation?

Now, these are just some kinds of strategies that an organization can follow, but what are the actual steps that are needed to be taken in order to mitigate risks properly? Well, let us break them down and see below:

Identify

The first step is to make sure that you are able to see the risk that might occur in the future. Identification is very important. The best way in this step is to work with all the parties that are involved so that you have a broader perspective of the others as well. This will encompass everything that is needed to make that plan. This can be done with the use of project documentation and other things available that highlight the goal, vision, scope, deliverables, etc.

Assess

Now that you have identified the risks that might happen in your project it is time for you to analyze them. This will include seeing what the probability of them occurring along with the negative impact that they are going to have on your team. The actions that you need to take for each of the risks that are going to come should depend on the category that you have defined for them when you are going for risk assessment. For example, when doing this, you can have various categories that could be called- Low-risk category, High-risk category, and anything if something falls in between. This will help you in dealing with them better and make the project deliverables very smooth.

Treating the risk

Now at this point, you will have to see how you are going to treat those results and what your action plans are for the same. You should pay special attention to recording the risk, knowing its categories, and what actions you need to implement in order to mitigate them or reduce their impact. You should log these things into the log register and make sure that everyone on the team has access to them. This will work as the action plan and will avoid confusion also and all the team members will be streamlined. This document will help in understanding what is mitigation of risk and what are action plans the team has taken.

Monitor

“Change is the only constant.” As the project goes on, there are many things that come around the way. So it becomes very important to make sure that you are recording these things and also using categories for the type of risks that are coming your way. To make sure that these things are not missed out, you can have weekly meetings and stand-ups where you can discuss the issues and monitor them.

Along with this, you can take help of various tools that will help you track project progress and check for risks.

Build your team

To make sure that you are not missing out on anything, you can have a dedicated team that can monitor, assesses and control the risks that might come with your project. This team will have experts that will help in foresee the risks and provide effective management strategies to mitigate them.

Report

The companies which are keeping records of their actions and using them to mitigate further issues that may arise in the future are thriving. So make sure that you are sharing information on the best practices, and approaches that you have followed for mitigating risk in your project. This will help a lot in the future. These reports will help the shareholders to make the policies as per the risk that might come because now they have a full picture of what is happening in the project. The regular reporting will help them to surface the risks that might not have been identified yet.

Wrapping up

We have discovered that while risks are an inherent part of business, we can still make sure that we are able to avoid them or minimize the impact of those risks on businesses. The best ways of risk mitigation are to avoid, accept, reduce/control or transfer. You certainly will have to deal with it. But with the right practices in hand, you can make sure that you can recover from it in no time. Having both awareness and also guidelines that will help in managing the risks in the organization is important. The people involved are needed to make these decisions constantly in their work day. With those guidelines and their proper implementation, the organization will be able to make sure that they have a proper risk management plan in order.

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