In a perfect world, businesses would face no problems. Yet, as we know, companies exist in the real world, and it’s rife with risks. Risks come in many different forms and at uncertain times, so risk mitigation strategies exist so that your business can be prepared.
How can you prepare for something unknown? Let’s take a look at what risk mitigation means, how to devise a plan and ways you can perfect your risk mitigation strategies.
Risk mitigation is the steps you take to reduce harmful effects on your business. It’s a process that entails developing methods to mitigate threats that can harm project objectives. Five main risk mitigation strategies exist, and part of the risk mitigation process is evaluating them to decide which is the right approach to take for the potential problem.
As such, risk mitigation tends to involve a team that is designed for the specific task of identifying, assessing and monitoring risks that are associated with a project. Not only does this team evaluate what could happen if the threat transpires, but they also design a plan to deal with the effects if and when they occur.
Everything you need to know about the risks of a project exists in a risk mitigation plan. To get specific, the plan should include:
The level of detail for a risk mitigation plan depends on the nature of the problem as well as the life-cycle phase of where the project stands.
Some businesses and situations allow for the choice between risk mitigation and risk avoidance. What this means is:
The best risk mitigation plans combine data and analytics with human critical thinking skills. You can begin with brainstorming sessions and SWOT analysis by which you assess the types of risks that are relevant to your project or business. You can look over past documentation and company history of similar experiences to gauge potential outcomes and ideate how to reduce or avoid said risks.
Going a step further, you can leverage data automation tools to help you with this critical step of risk mitigation. You can use a data automation tool like SolveXia for identifying and reducing many risks such as:
The most important thing you can do when it comes to risk mitigation is to begin the process! Simply put, you have to devise a plan. For a proper risk mitigation plan, you should include:
From businesses around the world, it’s possible to glean deep insight from trends and patterns. Here’s what experts have found when it comes to risk mitigation:
A risk mitigation plan involves the assessment of risk. Here’s how you can adequately evaluate risk so you can implement the appropriate risk mitigation strategy:
Identification: First, you need to identify the types of risks inherent in a project or plan. This is the only way to know if the risk can be avoided. There are internal and external risks. The best way to manage internal risks is to set up standardised procedures (and use automation software to help enable such processes). External risks include situations that are outside of the business’ control, like natural disasters. These are neither avoidable nor desirable.
Impact Assessment: In this step, you determine the likelihood. You should assign a probability to understand how likely it is for each risk to occur. At the same time, you need to evaluate the depth of the consequences to your business if the threat does indeed come to fruition.
Strategies: Based on the impact assessment, you can prioritise which risks are most important to focus on. Then, you can decide what risk mitigation strategy can be applied. For risks that are less likely to occur, it’s useful to monitor them, but not worthwhile to focus all your time and energy on low likelihood events.
As a process, a business’ risk mitigation strategy will vary based on the situation at hand and the type of business. Business goals also play a role in determining what strategy to employ at any given time. There are five main strategies for risk mitigation, which include:
1. Accept: This is when you understand that the risk exists and purposefully decide that you will accept it without employing any specific effort to try to control it. This decision will come from the top, as in, it will require that a project leader is on board to accept the risk (knowing the potential consequences). Risk acceptance is a strategy even though you don’t have to do anything with regards to the risk’s effects. Choosing to accept risk happens when the following condition is met: The risk’s impact or likelihood is less costly than choosing an alternate risk mitigation strategy.
2. Avoid: If you can do this, avoiding the risk entirely is the best way to prevent adverse effects. It requires that you make an adjustment or change a plan to prevent the cause of the risk. Frequently, risk avoidance tends to be the most expensive of all the strategies. But, if the risk is big enough or dangerous enough, it can prove to be a worthwhile and cost-effective route (especially in the long-term).
3. Control: In the case of controlling risk, you understand the risk is likely to occur, but you present ways to reduce its impact. Risk control (or limitation) is the most common strategy because it involves a mixture of avoidance and acceptance. It does require conscious effort and the allocation of resources. For example, risk control can come in the form of gathering data or using early warning systems and alerts. This provides assistance to identify better, mitigate and face the risk. In this regard, businesses plan for ways to minimise any detrimental outcomes by taking actions.
4. Transfer: Risk transference is what happens when you have insurance. It’s the reassignment of organisational accountability bypassing the risk on to another stakeholder to deal with it. Automated software solutions can also serve as a type of insurance. For example, SolveXia has audit trails and bank-grade security that help to alleviate compliance risk and data security risks. Bypassing on such tasks to an expert third party, your business can focus on its specialisations rather than worrying about risks.
5. Monitor: With low-likelihood risks, the monitoring strategy is the best choice. It requires that you watch the environment for any changes that may affect the consequences of a risk. In smaller organisations, risk monitoring could be done manually. However, for any organisation size, it’s best to employ technology to help monitor risk. With data automation tools, you can better watch risk as information is automatically updated in real-time, alerts can be set up, and you can schedule reports that get delivered automatically to specific people at a particular point in time.
The best practices of risk mitigation involve data and automation. This is because data and automation tools play such a significant role in continuous process improvement and the ability to carry out business processes accurately. SolveXia provides your team with an automated solution for data-heavy and monotonous tasks that are prone to human error. Human errors, bottlenecks and delays all pose various risks for an organisation’s inner workings. But, with an automation solution, you can significantly reduce risks and be able to maintain better control of what happens within your organisation.
Businesses who successfully employ risk mitigation strategies do the following:
The only thing that is 100% certain when it comes to the uncertainty surrounding risks is that they indeed exist. That’s why it’s essential to have a risk mitigation strategy ready to go within your organisation. You can use automation tools like SolveXia to leverage historical data and help you better prepare for future events (thanks to analytics). Risk mitigation will also need a human element.
It’s up to management to determine how to approach various business risks. When doing so, it’s essential to think about all stakeholders to a business, both internally and externally. After identifying and assessing the likelihood of any risk, you can choose the best plan to enact with the help of your team and automation tools like SolveXia.