Identification and mitigation of business risks can save your company both time and money – not to mention stress – from potential disasters. Business risk mitigation strategies allow organizations to prepare for events which might interrupt employee productivity or impact financial results negatively.

Businesses should document risks and their impacts as part of the identification process, prioritizing those risks based on probability and impact.

Risk Assessment

Identification of risks that threaten your business is the first step toward mitigating them. This may require qualitative techniques like risk matrices or quantitative approaches such as modeling or statistical analysis; either way, take into account likely events as well as how severe any adverse consequences would be for the future of your business should any of them transpire.

An example would be a manufacturer that is at risk of having their supply chain disrupted due to a global semiconductor shortage, essential in producing products ranging from smart phones and tablet computers to car stereos and appliances. A risk assessment could help them mitigate that risk by creating contingency plans and developing relationships with alternative suppliers from across different regions around the globe.

As with any process, risk assessment requires constant effort to stay abreast of potential threats that arise. You should plan regular reassessments, document all identified risks, and devise mitigation strategies accordingly.

Risk Analysis

Risk analysis is an analytical strategy designed to uncover any threats that could disrupt efficient productivity or the execution of business tasks, from historical data, theoretical analyses, stakeholder input and expert opinions. It can be applied across any aspect of an operation’s environment that requires evaluation in order to identify any possible hiccups in productivity and execution of tasks. Sources of useful information in identifying risks may include historical records, theoretical suppositions or expert opinions.

After being identified, risks must be evaluated and classified based on severity and probability. A useful tool for doing this is the risk matrix; using it, one can easily establish priority of each risk as well as measures needed to manage them.

Businesses can utilize this information to develop contingency plans that mitigate disruptive events and ensure seamless business operations. For instance, manufacturing firms could develop plans to safeguard their supply chains by developing relationships with other suppliers around the globe; such plans can help minimize political instability risk in key sourcing countries while simultaneously decreasing data breach risk with multi-factor authentication and employee training strategies.

Risk Prioritization

When risks have been identified and assessed, identified threats must be prioritized on the basis of likelihood and severity. The risk matrix is a convenient way to do so.

Usually, a risk matrix will provide the likelihood that risk will occur and how it might affect the business, at x and y axes respectively. Every risk then is ranked on this matrix, with risks with the highest probability of impact being given priority treatment and mitigation at the earliest.

When making decisions regarding risk mitigation and priorities, organizations look at the cost of addressing each risk. Cost-consuming risks may be pushed above ones with less need to be fixed, particularly when internal resources are tight in an organisation. Otherwise, regulatory fines or legal fees may trump preference as a guide to priority determination. Regularly updating stakeholders on identified risks and where they are at will facilitate the right conditions for risk education and mitigation.
Risk Mitigation

After identifying and assessing risks, businesses implement strategies to mitigate them. Mitigation strategies could involve either decreasing the likelihood that risks occur or mitigating their effects if they do happen.

An organization may switch away from toxic chemicals that pose environmental and health hazards while increasing safety for employees by switching over to safer alternatives. They could also strengthen their insurance policies to cover potential financial losses caused by natural disasters, cyberattacks or other events that might arise.

Risk mitigation should be monitored over time to ensure its strategies are effective and the business is protected. Involving all relevant stakeholders is vital in creating an effective risk mitigation plan; such stakeholders could include employees, managers, unions, investors or clients. All parties involved will then work towards the same goal: decreasing risks the company is exposed to while upholding ethical and strategic interests of the business.