What is Risk Mitigation? Definition and Strategies.

Risk Mitigation is the process by which an organization introduces specific measures to minimize or eliminate unacceptable risks associated with its operation. Risk mitigation measures can be directed toward reducing the severity of risk consequences, the probability of the risk materializing, or reducing the organization’s exposure to the risk. The threats to the organization are numerous. Natural calamities can disrupt, shut down, or damage a company.  Many organizations have plans to reduce the impact of a Risk Event. Some risks aren’t avoidable. Therefore companies need to plan to get rid of various threats, repair the damage, and restore the operation.

What is Risk Mitigation?

In simple words, it means the process of planning and proper methods and options to minimize threats. A project team will look after it and implement the strategies to identify, monitor, and evaluate risks and consequences inherent to completing a certain project, such as a new product creation. 

In this article, we will analyze the risk mitigation strategies and how they might be used.

Risk Mitigation Strategies:

There are various types of Strategies. These strategies are used in combination with one other, and one may be preferable over another, depending on the company’s risk landscape. They are part of the broader practice of risk management.

1. Risk Acceptance:

 This strategy is commonly used to identify and understand the risks. Risk acceptance means “risking it”. The term also means that the risk exists and there is nothing you will do to change it. It’s better to understand the probability of it happening and accept the consequences that may occur. This is one of the best strategies when risk is small or unlikely to happen. It is always better to accept risk when the cost of avoiding will be higher than merely accepting and leaving it to chance. A professional athlete is supposed to accept the risk of injury by continuing to play their sport in spite of the physical risks. This kind of decision is based on the belief that the potential rewards of success and economic gain outweigh the risk of injury.

2. Risk Avoidance:

This approach entirely avoids the activity that carries the effective risk. For example, if a customer has a past record of defaulting on loans, lending money to that person poses an intense credit risk. To avoid the risk, an entity may decide to decline the customer’s loan application. This strategy is suitable when the impact of the risk is high and the cost of mitigating it is significant.

3. Risk Transfer:

 The meaning is hidden in the title, risk transfer involves moving the risk to another party when accepting or avoiding the risk yourself is not possible, acquiring an insurance policy to cover the expenses of a data breach. This approach is fit for risks with a high potential impact and significant mitigation costs. It can, however, result in extra costs, and should be performed after thoroughly evaluating risks and costs. For example, someone buys car insurance for Rs. 10,000 which is valid only for external damage of the same, and this insurance is right up to 31st December 2023. This person had a car accident on 20th November 2023. His or her car suffers from intense physical damage, and the repair cost of the same accounts for Rs. 15000. can claim a maximum of Rs.10000 from his insurance provider, and he or she has to bear the rest cost.

4. Risk Sharing:

This is one of the risk mitigation strategies. In this business partners, stakeholders, or other third parties share the risk. If the risk happens, the responsibility or loss will not fall solely on one party, the collective responsibility can be seen. This way of dealing suits risks with a significant potential impact that cannot be avoided. It’s important to make clear agreements and communication channels in advance to ensure risk sharing and minimize the potential impact of disputes. For example, two parties sharing the risks is two builders coming together to build an apartment. They will share the financial risk of building and marketing the project, however, they also expect a higher reward by selling the flats.

5. Risk Buffering:

 This is also the risk mitigation strategy. Here, Buffering means the act of adding extra funds, time, or personnel to mitigate the potential impact of a risk. For example, implementing extra servers or backup systems can cut down the risk of a critical system failure.

6. Risk  Strategizing:

Risk strategizing involves making a substitute plan or “Plan B” for particular risks. For example, if the project’s size makes risk management a challenge, developing an alternative plan to manage the project in smaller segments can reduce potential risks.

Risk Mitigation Training:

Project management course plays an important role in every organization. These days it’s very difficult for every organization to work without proper management. This course helps by introducing new tools that allow to perform in a better way. Professionals learn new skills that bring success to the organization. Henry Harvin is one of the top institutions that provides skill-based learning in India.

Boost up your project management skills with Henry Harvin’s comprehensive courses. Gain practical knowledge as well as industry insights, and get globally recognized certifications. It’s the right time to achieve project success with Henry Harvin

Join the PMP Certification Training Course 

• 36 Hrs Training(Live Session+ project +Recorded Videos)
• 91 End of Chapter Quizzes and 7 Exams
• 35 PDUs+ 32 Credits Certificate with 98.8% Passing rate
• Get the best faculty in a single click
• Henry Harvin assigns a variety of projects in order to bring concepts as well as practical knowledge.
• Certification after completing the training and also get the exam preparation tips from the trainers
• Students will get job support from the institution. Top companies allow students to apply to the company and get hired.

Recommended Reads:

• PMP Exam Preparation Practice Test 2023
• Quick solutions related to PMP Certification

Conclusion:

All businesses face risks at any time and it is very common but managing the risk is very important. Risk Mitigation can help from various risks that occur suddenly and helps to reduce the impact. In this article, we have discussed the strategies that certainly help you to minimize the risk for your organization.

Frequently Asked Questions:

Q1.What is the difference between Risk Management and Risk Mitigation?

Ans. Risk mitigation is a part of the bigger risk management process. While risk management focuses on organizational risks, mitigation deals with the effects of unavoidable risks and how to reduce them.

Q2 How do you identify risks?

Ans. Identifying risks can be troublesome; however, it’s important to deal with them properly This means that teams are required to consider the risks involving tools, natural disasters, safety risks, and anything else an organization may face while conducting operations.

Q3. What is the goal of a risk mitigation plan?

Ans.  To minimize the likelihood of business or project risk, as well as to put strategies in place to monitor and respond to potential threats is the goal of this plan.

Q.4 What is the meaning of Risk Mitigation?

Ans. The meaning is very simple. It is the process of reducing the risk and minimizing the effect of an incident. It is basically a strategy to repair the damage of an organization.

Q.5. What are the 4 types of Risk mitigation?

Ans. There are many types but the most common four types are avoidance, reduction, transference, and acceptance.