Risk mitigation strategies can help businesses protect themselves from unwanted consequences of business activities. These include avoidance, acceptance, and mitigation or transference.
Identifying risks and monitoring their effects are essential for a successful business. But these risk management tools are not one-size-fits all. Different scenarios call for different risk mitigation techniques.
Avoidance strategies are designed to remove the potential for risk. This means avoiding projects, business ventures or other activities that might not be profitable or pose a threat to company operations. It also includes refusing clients that might cause financial loss.
It is a common risk management strategy that can have positive results. However, if avoidance is used too often, it can be counterproductive. It can also reduce opportunities for new revenue streams, client growth or business expansion.
Companies can implement avoidance strategies by evaluating their business goals and current resources. A gap analysis is a productive first step in this process, as it can identify the difference between a company’s actual and desired success metrics. This can help determine whether a risk avoidance plan is viable. If not, it may be necessary to consider other sustainable risk response strategies. Ultimately, it is important to balance risk avoidance and reduction. Avoiding too many risks could limit growth opportunities, while accepting too many risks can lead to financial losses that are not recoverable.
Risk acceptance is a risk management strategy where the business decides that the impact of a potential risk is so small that they will not take any action to mitigate it. This is usually considered for those risks that are too low to bother protecting against, or where rapid mitigation would be too expensive to warrant it.
In the context of humanitarian agencies, risk acceptance focuses on reducing threats from local community members and conflict actors by promoting a positive image for aid work. It is less common than protective and deterrent strategies, as it requires sustained effort and investment in staff training, communication and outreach, which are more difficult to justify to donors than ‘hard’ security expenditures such as blast walls and armed guards.
Experimental research comparing the effectiveness of acceptance with other emotion regulation strategies such as suppression, distraction and reappraisal have produced contradictory results. A better understanding of what is causing these differences is needed to develop effective and parsimonious methods.
Mitigation is an important part of risk management. It’s not a perfect solution, but it can help businesses avoid or reduce the impact of risks.
To mitigate a risk, you need to take steps to prevent or reduce the likelihood of it occurring. This may include implementing policies or procedures to protect against the risk. It also includes educating staff on the risk and how to handle it.
If the risk is still likely to occur, you can develop a contingency plan. For example, if your intrusion detection system fails to stop a cyber attack, you need a backup plan in place.
This is also known as compensatory mitigation. It’s when you compensate for the adverse impacts of other risk reduction strategies like avoidance and acceptance. For example, to offset carbon emissions, you could install new solar panels or improve energy efficiency in buildings. You can also encourage more sustainable travel habits or promote public transportation.
Transference strategies involve handing over the responsibility for managing a particular risk to someone else. This can be accomplished through contracting with outside vendors to perform service functions – like physical security – or by purchasing insurance policies that cover the financial impact of certain events. This is often seen as an effective risk management strategy because it allows organizations to focus on their core business mandate.
However, there are several considerations to keep in mind when employing transference strategies. The first is to ensure that any outside contractors have the appropriate level of expertise and knowledge to manage a particular event. The second is to be aware that any negative impact to the company could have a lasting effect on its reputation.
Therapists and others in the mental health field also have to be mindful of transference and countertransference when collaborating with clients. For example, a client’s unresolved anger toward a dominating authority figure from their childhood might be transferred onto their therapist.