Risk mitigation strategies is a term to describe different ways of dealing with risks. These strategies include risk avoidance, transfer, elimination, sharing and reducing to an acceptable level. We have to keep in mind that there are always some risks and that’s why the fundamental question is not how to eliminate the risk but how to deal with the risk in a way to reduce to the minimum level the impact or the probability of occurrence.
What can we do about risks? What are the possible strategies?
- Risk acceptance or risk retention - when we accept the identified risk and do not take any other action in order to reduce the risk because we can accept its impact - the possible consequences. We simply risk it.
- Risk reduction - when we take some measures (countermeasure) to reduce the risk to an acceptable level.
- Risk transfer - when we transfer the risk to another person or entity. In practice, companies can for instance get an insurance (transfer of risk to an insurance agency) or can transfer the risk to another company by means of outsourcing.
- Risk avoidance - when we decide not to realize our intention from which the risk arises, for example, it means that we will not launch our project or will not conclude a contract.
Which risk-reduction strategy to choose?
The suitability of a particular strategy must always be thought through according to the situation and the probability and impact of the particular risk. Also, we should consider our real possibilities to deal with the risk using some other strategy. For example, if there is no risk insurance available on the market, logically, we have to exclude this strategy and choose another one. We must be able to recognise the best way of dealing with risk according to the situation. It must be stressed again that no risk can be completely eliminated (unless we want to “give up”). The risks will always be there and our task is to determine whether they are acceptable for us or not.