Over the years, risk management has gained more attention, and several organizations now have either a risk management committee or a compliance department. Two of the popular concepts in the risk management field are risk mitigation and risk remediation.
Most people use these terms to mean the same thing, but they are distinctively different. Risk mitigation means minimizing risks to the extent that they can be tolerated or accepted. On the other hand, risk remediation actively eradicates identified threats and vulnerabilities.
Risk remediation is ideal when the threat at hand is severe or when the remediation measures are practical and easy to implement. However, risk mitigation is often the way to go if the threat is severe but cannot be eliminated. We have discussed more on these two concepts, including how to implement each in your organization.
Risk mitigation is a technique in which enterprises prepare to minimize the impact of possible disasters and threats common in the business environment. Through risk mitigation, companies can identify various risk events and work on their solutions before they occur. In most cases, risk management aims to prepare for all possible threats and have the best mitigation measures in place. However, this is easier said than done.
Instead of taking a one-size-fits-all approach to risk management, risk mitigation follows a more strategic path. For instance, risk managers will identify and categorize various risks according to their probability of occurrence and severity. They will then work on the best mitigation measures and put aside the necessary resources to mitigate these risks well.
One of the primary purposes of risk mitigation is to ensure business continuity. Organizations that design and implement robust risk mitigation strategies are more likely to weather disruptions and thrive in uncertain times.
Common Risk Mitigation Strategies
At the heart of an effective risk mitigation plan are five strategies that ensure your business stays ahead of any threats. These strategies are relevant not only at the organization level but also at the project level. That means you can use them to oversee standalone project implementation. These strategies include:
Business risks are everywhere, and it takes proper monitoring to catch them before they cause problems. It’s the responsibility of the risk managers to set up risk monitoring capabilities that ensure every process is fully monitored against a set of known risks. A robust risk monitoring strategy should be automated to improve efficiency and accuracy.
As a project manager or risk officer, you want to ensure enough resources to monitor risks in your projects or the entire organization. Proper risk monitoring requires investment in modern technologies and trained risk management personnel.
Besides monitoring your processes and projects for risks, it’s necessary also to try and control the impact these risks may bring. If a risk event cannot be avoided, you want to put some measures in place to cushion your organization against the potential side effects. For instance, if you run the risk of surpassing your budget, you can set up cash reserves to ensure you have some emergency funds.
Every risk control strategy aims to have an alternative path to achieving your goals when a risk event occurs. You can think of it as a way to minimize unavoidable obstacles. Before finding ways to control a risk’s impact, you should first try to avoid the threat itself.
As the name suggests, risk avoidance is a way of stopping a risk event from happening. It is a common strategy used in most organizations as it is one of the most desirable risk mitigation techniques. An effective risk avoidance strategy takes a step-by-step approach to identify potential risks and finding ways to avoid them altogether.
An example of risk avoidance is minimizing the chances of overspending or running out of money by creating a budget and ensuring everything falls within that budget. That would involve doing proper market research and implementing cost minimization techniques.
If a risk cannot be avoided, team members may come together to discuss the impact of accepting that risk. That doesn’t mean blindly taking the risk and all its impacts; instead, it’s a way of analyzing the consequences of the various risk events and identifying what the organization can comfortably handle.
For instance, delaying or avoiding salary raises could lead to high turnover, resulting in low performance, poor quality products, and more than 20% loss in revenue in the medium to long term.
On the other hand, raising the wages could instantly result in a 5% drop in profits while maintaining your reputation and boosting productivity in the long term. You’ll make a better and more informed decision by analyzing the impact of accepting either of the two risks.
When risk cannot be avoided but is still significant for you to handle, it is prudent to transfer it. After brainstorming about what happens after accepting a risk, you’ll have a clear picture of what happens next. You can use this information to find risk transfer opportunities such that you have someone to share the risk with you.
A perfect way to transfer risk is to subscribe to an insurance plan that will come in to cover your losses in case of a risk event. Before transferring a risk, you should first understand what you stand to lose and gain in the long term.
How to Design a Risk Mitigation Plan?
When designing a risk mitigation plan, you want to use a true and tested approach to ensure you capture all the essential elements and address all the possible risks. Here are the five key steps you can follow to design a highly-effective risk mitigation plan.
Identify All the Possible Risks
A risk mitigation strategy should reflect all the possible risks that your organization faces. These risks should factor in all the day-to-day business processes, employees, customers, leadership, etc. To capture all the relevant risks, you should welcome input from all your team members. Consider holding a risk brainstorming session where everyone suggests a risk on their radar.
You can also look at history and note some of the past risks you have experienced in your business. Similarly, you can study your competitors to check the risk events they have experienced or those they are monitoring.
Conduct a Risk Assessment
After identifying and listing all the possible risks, you want to conduct a thorough risk assessment. The goal is to evaluate and analyze the different types of risks based on factors such as occurrence frequency, risk impact, and severity. By accessing the various risks, you can easily categorize them and work on their mitigation measures. Through a rigorous risk assessment, you can set up processes and controls to help you minimize the risk impacts. You’ll also tell the risks you can successfully control, those to avoid, and the ones to transfer.
Risk prioritization is all about ranking risks based on urgency and relevancy. Some threats may be urgent but not relevant at a particular time. However, some may be sensitive and urgent, meaning you’ll have to prioritize them above others. Before prioritizing risks, you want to establish a risk threshold beyond which risk is considered urgent or essential. That way, you’ll have an easy time prioritizing the various risks you are monitoring.
For every risk you consider urgent and important, you want to allocate the necessary resources towards mitigation. Otherwise, you’ll not be able to meet your risk management goals.
Track Your Risks
Risk tracking is a critical part of the risk mitigation strategy that ensures you are up to date with your risk management efforts. To effectively track your risks, you need the right metrics in place. That way, you can keep up with the risk landscape as the market evolves.
One way to stay on top of your risk-tracking needs is to invest in the right tools and resources. Consider a real-time risk tracking solutions that will keep you updated on critical risk events. It’s through risk tracking that you can successfully meet regulatory compliance.
Monitor Your Progress
Risk mitigation is a work-in-progress. It’s a journey that requires constant evaluation and adjustments. As the business landscape changes, so do the risk components and your approach to risk management. By constantly monitoring your risk mitigation efforts, you can easily adjust them for the better. Remember, you cannot improve what you cannot measure.
Maximizing Your Risk Mitigation Plan
Now that you know the common risk mitigation strategies and how to implement them, you want to learn some tips and best practices to help you make the most of your risk mitigation plan. Here’s where you can start:
Ensure all-Stakeholder Buy-In
To get the most out of your risk mitigation plan, you want support from everyone within your organization. Whether focused on operational, reputational, compliance, or cybersecurity risks, getting the necessary support from company leaders, employees, and even customers can make risk management more convenient.
Before implementing a risk mitigation plan, you should state your goals and ensure they resonate with everyone within the organization. These goals should also align with the broader organizational vision and mission.
Nurture a Culture around Risk Mitigation and Management
Your company culture is one of the elements that can either make or break your risk mitigation plan. For your risk management goals to enjoy vibrant support from your teammates and everyone within the organization, there must be a favorable workplace culture rooted in risk management.
In other words, everyone within the organization should value risk mitigation as much as your team values it. Otherwise, you will be implementing strategies that nobody pays attention to.
Communicate Risks Effectively
Besides engaging everyone and nurturing a positive workplace culture, you also want to work on an effective communication strategy. Every time you describe what risk is, or the various risk mitigation strategies you wish to implement, you should pay attention to how you deliver your message.
By effectively communicating the various risks and ensuring everyone can understand and relate them to their day-to-day life, you’ll have won their hearts and given them a reason to be part of the cause.
Ensure Accountability Amongst Your Team
When working on risk management, you should ensure every team member has a role. That could mean assigning every team member to a given risk category or group of risks. The goal is to ensure accountability in monitoring, tracking, and improving the response to the various risk events. However, this doesn’t mean an end to teamwork and collaboration.
Ideally, you can assign a leadership role to every team member in the different risk categories, where they oversee the implementation of various risk mitigation measures. That means everyone will contribute to risk management while also being accountable to the various risk categories.
What is Risk Remediation?
Unlike risk mitigation, which is about getting ready to face or avoid threats, risk remediation focuses more on fixing the identified vulnerabilities. It allows identified risks to be resolved and dealt with before they mature into real-world problems. To remediate risks successfully, you need a risk remediation strategy that’s relevant and compatible with your overall risk management strategy. Before we look at how to implement a risk remediation plan, let’s first look at the common risk remediation challenges.
Common Risk Remediation Challenges
Some common challenges that project and risk managers face when trying to remediate risks include a lack of visibility, communication challenges, and poor risk prioritization. We have discussed these factors below.
Poor or a complete lack of visibility means there is a barrier to identifying risk or acknowledging that a threat exists. This could be due to inefficient risk identification, incompetence, or a lack of the necessary risk management resources. An example of poor visibility is when a new regulatory risk is set to affect a project but is not clear or visible to the team. That means the team will proceed to implement the project only to fail the compliance test a couple of months or even years later.
The first step to solving visibility issues is to stay up to date with the business risk landscape and to get the best resources on board. For instance, ensure you have qualified and expert personnel in your risk remediation team. Investing in the right technologies can also help boost risk remediation accuracy and efficiency.
Proper communication is critical to effective collaboration and teamwork. If there’s poor communication amongst teams or throughout the organization, risk remediation is likely to fail. This is because most risk remediation depends on feedback and input from various individuals. A lack of an effective communication channel will affect how well you can respond to a risk event.
Inefficient Risk Prioritization Plan
As noted earlier, not all risks are the same. Some risks are more urgent but less relevant, while others are relevant but less urgent. As a risk manager, it’s important to strike a delicate balance between urgency and relevancy when addressing various risk events. Risk prioritization often begins with proper risk identification and categorization. If you don’t do an excellent job identifying, describing, and categorizing the various types of risks, you are more likely to prioritize the various risk events poorly.
Implementing a Risk Remediation Plan
Before implementing a risk remediation plan, you need to go back to the basics of risk management. This is because, without proper risk identification and classification, you will be responding either to a wrong risk or doing so in a sub-optimal way. Here’s how you can effectively implement a risk remediation plan.
Risk Discovery and Mapping
With risk discovery and mapping, you revisit the risk events to understand them better. Ideally, you want to focus on identifying and classifying the risk and mapping it to the relevant risks on your radar. When addressing a potential data breach event, you want to ascertain that the incident is a data breach. That way, you can compare the threat with other data breach incidents you are familiar with.
The goal is to locate a pattern that can guide your remediation plan. This will also inform your actions since you’ll work with relevant insights from past data and inputs from knowledgeable personnel.
Define Risk Severity
Before trying to remediate a risk event, you should know what you are getting yourself into. Not all risk events deserve the same level of attention. The more complicated or severe a threat is, the more resources or attention you should assign. If a risk is within your team’s level of competence, you can quickly address it to minimize downtime and get everything back to normal.
However, if you are dealing with a new risk that you aren’t sure of its severity, you need to take extra precautions. That could mean factoring in some controls to ensure the risk doesn’t spread or worsen if the remediation plan fails.
Update on the Go
Another critical part of tackling risk is updating your risk remediation techniques. That means changing your strategies with the changing risk landscape and learning from your mistakes. Most risk managers use obsolete risk remediation strategies to solve new risks. This can be quite inefficient, considering that most threats evolve with time.
Get Started Today
Any organization looking to meet its growth targets or enhance its bottom line must first work on managing its risks. Staying ahead of the day-to-day business uncertainties can be challenging without proper risk mitigation and remediation plan. As a project manager, you should first understand the difference between risk mitigation and remediation and how to implement each as part of your risk management strategy.