What Is Risk Mitigation? Success-Driven Strategies & Insights You Need to Know

Operating and growing a business has seemingly endless moving pieces. Ongoing research and development, creating effective marketing strategies, and finding trustworthy vendors are only a few of the essential objectives of a successful business. 

And with each moving piece comes some element of risk, which refers to any event that can harm a business. These can include anything from environmental, technological, financial, and other business risks. Even growth directly increases the possibility of risk. 

That’s why risk mitigation is more important than ever today. This crucial process involves identifying potential risks and crafting strategies to mitigate their impact on business operations. 

For example, it shouldn’t come as a surprise the leading risk so far in 2022 is cybercrime, taking the top spot away from business interruption caused by the COVID-19 pandemic. Businesses mitigate this risk by adopting innovative digital tools to detect financial crimes, as indicated by 86% of surveyed organizations. This example illustrates how businesses have identified risk and have taken steps to mitigate its impacts. 

It’s time to do a deep dive into risk mitigation and impart valuable strategies to help businesses craft strategies to mitigate the impact of any risks that may affect their operations. Read on to learn more about the critical practice of risk mitigation. 

What Is Risk Mitigation

What is the meaning of Risk Mitigation? 

Risk mitigation is the process of identifying potential risks, assessing their business impact, and creating a plan to mitigate their damage to the company. Well-planned risk mitigation strategies can make the difference between taking a particular event in stride or going out of business because of it. 

The Purpose of a Risk Mitigation Plan

Mitigating risks requires a systematic plan to ensure a company correctly identifies and responds to any potential risk. A risk mitigation plan will include the following components:

  • Identify possible risk events related to a company’s location, technological capabilities, the sensitivity of company data, overall operations, and even personnel. 
  • Assess the potential impact of all identified risks. This assessment includes identifying the controls and processes needed to reduce or eliminate the effects of the threat.
  • Prioritize each identified risk by its severity, such as its impact on the ability to operate the business or the costs to recover from the event. 
  • Implement actionable plans to address and mitigate the identified risks. We will discuss this step in further detail below. 
  • Monitor and refine risk mitigation plans continually. Plans may require updates if they are not sufficiently mitigating or preventing the risk. 

An essential purpose of risk mitigation is maintaining regulatory compliance. Your business will likely need to comply with regulations unique to your industry and region. A quality risk mitigation plan will help maintain your compliance, which may prevent incurring fees and will likely build confidence with your partners. 

What’s at Risk? Risk Mitigation Examples

“Risk” is a broad term for anything that poses a threat to the business. However, that definition may be open for interpretation, so let’s discuss some common and more specific risk categories:

  • Financial risks: This category describes anything that impacts the organization’s cash flow. A common type of financial risk is when operating costs exceed revenue. The impacts become quite severe, and businesses should have a plan to weather these storms. 
  • Resource risks: What will your business do if you cannot find the skilled workers it requires? How will your business adapt to a supply chain disruption?
  • Technological risks: Cybercrime is undoubtedly a critical technological risk to consider, but it’s not the only one. For example, depending on a vendor to provide data storage creates a technological risk as they may go out of business or lack the resources to scale alongside your business. 
  • Environmental risks: Wildfires, tornados, and earthquakes are all environmental risks. These risks are somewhat straightforward to identify based on available data, but they require in-depth plans to mitigate their impact. For example, what will your business do if a wildfire moves toward your manufacturing plant?

Risk Mitigation vs. Risk Management

You’ve likely encountered the term “risk management” before, but how does it vary from risk mitigation?

Risk management is an umbrella term that includes risk mitigation. Risk mitigation is more specific and refers to reducing or eliminating the impact of identified risks. Meanwhile, risk management includes deeper analysis, risk prioritization, and monitoring.

However, you may see these terms used interchangeably. Whichever term you see, the critical part is how it relates to protecting your company from harm.

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Types of Risk Mitigation Handling and Strategies

How do you handle identified risks? What are mitigation strategies? There are four standard approaches to risk mitigation handling:

  1. Risk avoidance: This risk mitigation strategy calls for entirely sidestepping the risk. A company may avoid a risky situation if the potential consequences of a specific action are deemed too severe. For example, a business may altogether avoid building new offices in a politically unstable region or decide not to outsource manufacturing its innovative new products. 
  2. Risk acceptance: You can consider this handling strategy the exact opposite of risk avoidance. Instead of sidestepping the risk, you accept that it may occur and put your focus on mitigating more severe risks. No specific actions are taken unless further analysis calls for a new strategy.
  3. Risk transfer: The organization may identify a risk but see an opportunity to share its impact with another entity or transfer it to them altogether. A typical example of risk transfer is buying an insurance policy to cover the risk in question. Additionally, risk transfer is often the best strategy for risks that require specialized solutions, such as hiring a cybersecurity firm.
  4. Risk monitoring: An organization may need to continually monitor an identified risk before deciding on a specific strategy. Risk monitoring also covers an overarching strategy of continually identifying new risks.

Many organizations will use several of these approaches in combination. For example, risk monitoring is generally included in the other three strategies. Your exact approach will depend on the needs of your organization.

How to Write a Risk Mitigation Plan

The above handling categories will inform a specific risk mitigation strategy. Below is a brief overview of how your organization can craft effective strategies to minimize the impact of identified risks:

Determine the goals of the risk mitigation plan

A practical plan begins by picking one or more of the above risk-handling strategies. Decision-makers will generally pick the overall strategies since any risk mitigation strategy will impact the business directly. Leaders need to understand that most identified risks will recur and consider the ongoing costs of the mitigation plan. 

Determining the goals will also involve considering which risks are most impactful or most likely to occur. A comprehensive risk assessment or use of a cyber risk register will help you to determine these.

Craft the content of the mitigation plan

A risk manager should be appointed that has the skills, knowledge, resources, and authority to develop and execute the specific strategies in the plan. The new plan should answer the following:

  • What actions must be taken?
  • When should these actions be completed?
  • Who is responsible for each action?
  • What resources are needed to accomplish the plan?
  • How will each action reduce the risk’s impact and severity?

Make a contingency plan

You may need to develop a contingency plan for high-severity risks. The plan created in step two might not be as effective as desired in real-world scenarios. Develop a contingency plan that will be executed at a specific time if the stated plan fails to address the risk. For example, if an intrusion detection system fails to prevent unauthorized network access, how will the intruder be stopped? 

Create a deployment timeline 

Many risk mitigation strategies will involve multiple steps, including the contingency plan, and a timeline needs to be established for rolling out each step. 

Ongoing monitoring of implemented strategies 

There are very few, if any, situations that call for ‘set it and forget it.’ Deployed strategies need ongoing monitoring to gauge their effectiveness. Are they properly preventing or mitigating the impact of the stated risk? If not, it’s time to refine the strategy.

Embrace Risk Management with the Right Risk Mitigation Tools

Identifying and mitigating risks is an involved and often complicated process, but it’s a process that’s essential to the success of your business. Risks will be there whether you identify them or not; understanding threats to your business and mitigating their impact is crucial. 

Risk mitigation tools can make identifying risks and monitoring the effectiveness of mitigation strategies much more straightforward. Centraleyes offers a next-generation solution to identify, quantify, and remediate the risks your business faces. 

Are you looking to transform the way your business manages its risk? Book a demo today and see what next-generation risk management looks like.

Start Getting Value With
Centraleyes for Free

See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days