Risk mitigation strategies and recommendations to protect your business

Help protect your business with these risk mitigation strategies

Risk mitigation enables teams to identify and reduce potential problems and avoid halting production/business operations. But what strategies are the most effective for mitigating risks? And why should teams implement a risk mitigation strategy? We'll answer these questions and more below.

The difference between risk mitigation and risk management

Risk mitigation and risk management both help companies identify problems and find solutions. Risk mitigation is the act of minimizing the harm of a particular risk. It also involves developing a contingency plan to reduce the effects of a risk when it does occur. Risk management, on the other hand, is finding, assessing, and controlling internal issues.

The importance of risk mitigation

Risk mitigation gives companies time to prepare for worst-case scenarios and build proactive responses. It also keeps organizations on the same page and with a unified plan should risks arise. Here are some other risk management benefits for businesses across industries:

Future planning

Business leaders with a plan can make informed decisions knowing what hazards they may face. Using available data allows them to create business initiatives with potential problems in mind.

Work environment

Risk mitigation can make companies safer places for employees to work. Greater visibility and risk awareness allow businesses to apply relevant training. This can boost attraction and retention as people who feel protected at work may want to stay there longer. It also creates a culture of accountability. With an inside look at operational risks, employees can ensure employers take the necessary steps to reduce problems.

Employee engagement and productivity

When an employer provides a safe working environment, employees are more likely to feel encouraged and motivated. Engaged employees are productive and push companies forward. This type of workplace can also attract candidates who seek an engaging environment.

Business continuity

Effective risk mitigation measures ensure business continuity. Organizations can reduce downtime by identifying disruptions and implementing strategies to stop them. It also helps organizations maintain operational efficiency, even in adverse situations.

Innovation and growth

Risk mitigation lets organizations take calculated risks necessary for growth. Identifying and mitigating potential problems enables business leaders to pursue opportunities with more confidence.

Asset protection

Risk mitigation helps protect an organization’s valuable assets. This includes physical assets, intellectual property, and human resources. It also protects businesses from ruining their reputation. Proactive management shows customers, investors, and stakeholders that companies can handle challenges.

Compliance with regulations

Most industries are subject to regulatory requirements for effective risk management. Business leaders can use risk mitigation strategies to help organizations follow these rules. This helps them avoid penalties and legal consequences.  

Eight risk mitigation strategies to consider

A risk mitigation plan is essential for companies looking to achieve business continuity. There are several risk mitigation techniques to choose from:

Accept risk

Risk acceptance involves knowing the problem and accepting its potential effects with no further action. Teams often use this method to learn if the possible risks of a choice outweigh the potential for positive outcomes. It’s generally used for situations where the harm of the risk is low.

Accepting risks helps people understand how potential problems could impact the business. It gives everyone a shared understanding of the consequences involved.

Avoid risk

Risk avoidance is staying away from activities that could cause risks.  For example, a construction company won't continue to purchase from a provider if it doesn't receive raw materials on time. This action steers teams away from project delays.

This approach is best when the potential effect of the risk is high, and the cost to mitigate it is significant. Business leaders must know when choosing a risky path or a safer alternative is best.

Risk transfer

Risk transference shifts the risk to another party when avoiding that issue isn’t viable. Business leaders should determine if risk mitigation is too costly for them to afford.

A business can buy a cybersecurity insurance policy to cover the risk of a cyberattack. This protects companies from problems by sharing some of the risks with another entity.

Risk reduction

Risk reduction is the implementation of controls to reduce potential hazards. Through this strategy, teams identify and address problems before they become significant. Employers can rank concerns by priority to solve the most pressing risks first. Mitigating risk includes:

• Conducting regular maintenance and inspections
• Doing risk audits to identify any gaps in protection or company-wide weaknesses
• Enhancing security measures
• Improving processes

Risk buffering

Buffering risk adds extra resources, time, or personnel to mitigate a problem’s impact. For example, giving projects extra days in case something goes wrong.

This ensures companies have space to reduce the effect of an issue. Organizations can also apply redundant servers or backup systems to reduce the risk of a critical system failure.

Risk strategizing

This strategy involves developing a contingency plan. Companies do this to address the possible consequences of identified threats. These plans outline actions teams can take to reduce the impact if a risk occurs.

Risk strategizing could include setting aside a separate fund to cover unexpected costs. It could also involve developing backup and recovery procedures to reduce the effect of IT systems failure.

Risk digitization

This includes using online tools to identify, analyze, and reduce risks. Teams can enhance the accuracy of risk mitigation by using:

• Artificial intelligence
• Data analytics
• Machine learning

Business leaders must assess their existing risk mitigation process. This can help them determine where digital solutions may be helpful. They can review risk identification, risk monitoring, or reporting processes for efficiency. Then, they can choose digital tools and systems that align with their objectives and priorities.

Risk testing

Risk testing involves experimenting with problems and outcomes for better understanding. Teams can perform various tests to verify that a business decision is smart and secure. This could include conducting vulnerability assessments and code reviews. Doing so can highlight potential security threats and performance problems.

Popular risk testing techniques include:

• Scenario analysis: Creating hypothetical situations that represent potential risks to assess their impact on an organization. For example, simulating a natural disaster to learn how well a company responds to the problem’s impact.
  
  
• Stress testing: Putting systems, processes, or financial models in extreme conditions. This can assess their resilience and help identify vulnerabilities. Let’s say an accounting firm wants to see how its security measures act under attack. Stress testing the protective models can show their ability to hold up against hackers.
  
  
• Regulatory compliance testing: Assessing a company’s adherence to rules through audits, inspections, or compliance testing. This could include reviewing policies to ensure they align with industry standards.

Risk quantification

Quantifying threats helps businesses determine their financial risk. Putting an actual number to a risk helps business leaders organize responses. The expected money value calculates the expected financial impact of a problem. This is done by multiplying a risk's probability by its monetary loss.

A probabilistic risk assessment is another common risk quantification method. Teams can quantify uncertainties and dependencies to calculate the likelihood of outcomes. This strategy helps companies assess risks and use resources for better disaster recovery.

Who needs a risk mitigation plan?

It’s difficult to believe bad things can happen to safe companies. Even the most protected organizations can face threats.

Some industries have more risk exposure than others. This is especially true for international business. However, all leaders must consider general business risks and their impacts. That way, companies can determine the service that will benefit their workers most.

How Marsh McLennan Agency can help you protect your business

Risk mitigation planning reduces the potential impact of natural disasters or cybersecurity risks. It pays to have a partner when organizing an effective response.

With Marsh McLennan Agency’s Risk Management Solutions, you receive:

• Analytics to support decision-making
• Customized risk mitigation techniques
• Deep carrier relationships to leverage resources
• Experienced risk services client team
• Integration of employee health and safety as part of client culture
• Proactive approach to risk management
• Strategic relationships with clients, carriers, and vendors

Our team of risk management specialists can help you navigate potential risks in your industry. This can prepare your company for whatever comes its way.

Reach out to a risk management specialist today.