Risk Mitigation

To achieve their goals, organisations must continually access and review all elements of their operations. This includes reviewing the products and services they offer, the procedures employed across their operations and supply chains, and the impact and influence of stakeholder expectations and regulatory requirements.  

Each of these areas carry potential risks that require effective risk mitigation strategies. In addition, new risks such as cybersecurity threats, environmental challenges, and other external pressures continue to emerge. 

To systematically help manage and address these risks, many organisations adopt management systems based on internationally-recognised standards, such as those developed by ISO (International Organization for Standardization). These standards cover several areas including quality, safety, information security, and environmental management. Implementing an ISO-complaint management system provides a structured framework for risk planning and mitigation across operations, products, and supply chains within the relevant area of focus.  

What is risk mitigation?

Risk mitigation, or risk treatment, is a central element of the broader risk management process. Its purpose is to identify, select, and implement appropriate strategies to address risks. It involves preparing for unforeseen events and putting measures in place to minimise their potential negative impact. While the principle of risk mitigation is to prepare an organisation for all relevant risks, an effective treatment plan evaluates the potential impact of each risk and prioritises actions accordingly. 

Risk management and mitigation is a key component of the first requirements of most ISO standards and ISO has also developed a guidance standard – ISO 31000 – to assist organisations in their implementation. It provides guidance on how companies can integrate risk-based decision-making into their organisational governance, planning, management, reporting, policies, values, and culture.  

Why is risk mitigation important?

The risk mitigation process is a critical process for many reasons. Not all risks can be avoided, so as part of the risk management process, organisations must develop plans to manage, eliminate, or reduce the impact of risks as far as practical, should they occur. Essentially, risk mitigation refers to the pre‑planned actions an organisation puts into motion when an unexpected event occurs 

The goal of the risk management process is to identify how to protect people and assets, ensure business continuity and resilience, maintain financial stability, preserve reputation and public trust, comply with legal and regulatory requirements and enhance decision-making capabilities.  

The risk mitigation process: steps

There are a number of steps in the risk mitigation process. The process is designed to be dynamic and requires continuous and periodic monitoring and review to adapt to new risks that may emerge and changes that may occur.  

1. Risk Identification: Identify potential risks that could affect operations, assets, people, or organisational reputation. These may be internal (e.g., process inefficiencies) or external (e.g., regulatory changes, cyber threats, or market shifts). 
2. Risk Analysis: Analyse each identified risk to understand its potential impact and likelihood of occurring. 
3. Risk Prioritisation: Determine which risks pose the greatest threat so that resources can be focused on addressing the most critical issues first. 
4. Risk Evaluation and Treatment: After risks are analysed and evaluated, decide on the most appropriate response. This may involve avoiding the risk, reducing its likelihood or impact, transferring it (e.g., through insurance), or accepting it based on its nature and potential consequences. 
5. Risk Monitoring and Review: Continuously monitor risks and review mitigation measures to ensure they remain effective. Adjust risk controls and management system processes as conditions change. 

Types of risk mitigation

When it comes to risk management, understanding the various types of risk mitigation is crucial for developing a comprehensive strategy. There are four types of risk mitigation, namely: risk avoidance, risk transfer, risk reduction, and risk acceptance. Each type of risk mitigation targets specific areas of concern, from technical glitches to strategic misalignments, and requires tailored approaches to effectively manage the potential threats. Classifying risks into clear categories enables organisations to use resources efficiently and implement focused mitigation measures aligned with their operational, financial, and strategic priorities. 

Risk Avoidance

Risk avoidance can be defined as changing plans to eliminate the risk or condition. For example, if a project involves working at heights, using alternative methods that do not require working at such heights can avoid the risk of falls. 

Risk Transference

Risk transference involves shifting the risk from your business to a third party, such as through insurance or outsourcing. For instance, a company might purchase insurance to cover potential losses from a cyberattack, transferring the financial risk to the insurer. This example could be taken further by outsourcing cybersecurity and contracting another party to manage this aspect of the organisation’s business. Outsourcing certain management functions is a common practice in many businesses. 

Risk Reduction

Risk reduction is when an organisation or business takes steps to reduce the severity or likelihood of the risk. For example, an IT company may implement robust security protocols and encryption to reduce the risk of data breaches. Similarly, a business that believes its just‑in‑time production or delivery model has been compromised might choose to hold buffer stock in warehouses to ensure continuity. 

Risk Acceptance

The final risk mitigation strategy is risk acceptance, which involves acknowledging the risk and choosing to tolerate it without taking active steps to address it. This approach is often used when the cost of treatment exceeds the potential impact of the risk itself. 

Risk mitigation strategies and examples

An organisation will inevitably be exposed to several typical enterprise risks including financial risks, strategic risks, operational risks, compliance risks, reputational risks, IT security risks, occupational safety and health risks, market and customers’ risk, environmental risks, quality risk and technological risks. The combination of risk mitigation strategies to address each of these will involve discussion between all the parties involved, including internal and external stakeholders, to determine the optimal approach. 

Effective risk mitigation strategies are crucial for controlling and reducing organisational risks. While many approaches exist, and can be used alone or together, the right choice depends on each company’s industry and circumstances. As a result, it’s challenging to define one universal set of actions. 

ISO management systems standards such as ISO 9001 (quality), ISO 50001 (energy), ISO 14001 (environment) ISO 45001 (organisational health and safety) ISO 22000 (food safety) and ISO 27001 (information security), provide general guidance on risk management.

Certification to these standards by independent certification bodies allows organisations to demonstrate their commitment to customers and stakeholders, building trust and, in some instances, providing a ticket to trade.  

The ISO 31000 standard, which provides principles and guidance for risk management, is not itself a certifiable standard, but instead provides in-depth guidance that can help organisations approach the subject of risk management and mitigation in a structured way. Third party certification bodies such as DNV can help companies with risk management online courses to gain training and certification for standards that are certifiable.