10 Risk Mitigation techniques you need to know

byTam M. | reviewed 14/08/2021

Risk Mitigation is the process of reducing the impact of a risk or the likelihood of a risk being realized. stakeholdermap.com

Once risks are identified and assessed you need to decide what to do about them. There are several recognized ways to mitigate risk. Some mitigating actions reduce the likelihood of the risk occurring and others reduce the impact..

On occasion it can be justifiable to delay action on a risk or restructure a project in such a way so that if a risk occurs it will be later in the timeline. This can buy time to look at true mitigating actions. The table below lists typical risk mitigation approaches, with a description of the mitigation and an example..

The responses listed below are a little different from the suggestions made by PRINCE2, read more on Prince2 risk responses.

The 10 essential risk mitigation methods

Mitigation strategy	Description
Accept the risk	Accept the Risk - The is risk accepted because it has a low impact or low likelihood of occuring. stakeholdermap.com For example, if the risk were to occur it could be managed using well known and repeatable actions, or the risk has such a low probability of occuring that it is a risk worth taking. All projects will have risks that are so small in terms of impact or likelihood of occurance that they are accepted without discussion. Examples of this mitigation strategy Allowing company executives to travel by air or train. Using a script to upload data, because it is much faster than manual data entry, even though manual data entry might be safer. Going ahead with an event despite the risk of rain. Deciding to take part in a risky activity, which while well managed and supervised is still risky (e.g. motor racing). Effect on risk: Action on likelihood Action on impact Action on proximity
Avoid the risk	Avoid the risk - The risk is avoided entirely, perhaps by taking a different approach or by abandoning a course of action. stakeholdermap.com As Lock points out this requires the abandonment of all possible causes so could mean cancelling a project, or taking a radically different approach (Lock, 2007). Real-world example of Avoiding a Risk The pharmacetical company Novartis abandoned an Research & Development project due to risks around finding a cost effective synthesis route. Later Speedel, who had a more flexiblity in selecting a partner for solving synthesis problems took on the project (Ron Baus, p.pg. 154, 2015) Effect on risk: Action on likelihood Action on impact Action on proximity
Hedge the risk	Hedge the Risk - Used to manage financial risk. The risk is offset or limited by taking an opposite position in two markets. stakeholdermap.com Example of Hedging a risk A US company exporting to Europe takes out a Currency Forward Contract with a bank, this is an agreement to exchange an amount of dollars for Euros on a future date. It effectively allows the company to make a sale at the current exchange rate, so they don't lose out due to currency fluctuations. Effect on risk: Action on likelihood Action on impact Action on proximity
Provide a risk buffer	Risk Buffer - The impact of a risk is reduced by the provision of buffer. The obvious example is a contingency budget set aside to cover risks, but buffer could also be additional resources, or time built into a project. stakeholdermap.com Example of using a Risk Buffer A manufacturer keeps a buffer of raw materials inventory in case a supplier is unable to deliver a raw material shipment on time. Effect on risk: Action on likelihood Action on impact Action on proximity
Share the risk	Share the Risk - The risk impact or liability is shared among departments, partners or companies. stakeholdermap.com Real-word example of sharing risk In 2010, Corelio and Concentra, two media companies, created Coldset Printing Partners, a joint venture (JV) for their newspaper printing assets. This enabled them to reduce risks around capacity and to reduce the risk of price fluctuations. (Hbr, 2016). Effect on risk: Action on likelihood Action on impact Action on proximity
Find options or alternatives	Find options or alternatives - The risk is mitigated by identifying alternatives or options, sometimes researching or building alternative solutions in parallel. stakeholdermap.com For example power stations that have the option of switching between gas or oil mitigating the risk of increases in cost of one or other fuel. Example of using 'alternatives' to mitigate risk Software as a Service (SaaS) providers mitigate the risk of data loss or downtime by standing up two data centers a primary DC and a back up or failover DC. Effect on risk: Action on likelihood Action on impact Action on proximity
Transfer the risk	Transfer the risk - Some or all aspects of a risk are transferred to a another party via insurance or via contractual obligations. stakeholdermap.com Car owners transfer all or part of the risk of a car accident to an insurer and some construction contracts transfer risk to contractors rather than clients. As with car insurance in the UK some risks must be insured to meet a statutory or contractual requirement, for example employers liability insurance. Risks may also be transferred via an indemnity clause in a Contract also known as a hold-harmless or save-harmless clause. Examples of transfering risk Employers liability insurance is a common example of risk transfer. In the US Environmental Liability Transfer Inc. offer what they term as "walk away" transfer of environmental liabilities. ELT removes environmental liabilities from a companies balance sheet and assumes all obligations. Effect on risk: Action on likelihood Action on impact Action on proximity See also Insurance and Risk Management
Defer decision	Defer decisions that will 'lock in' a risk. For example delaying a decision on a particular approach in order to gather more data. stakeholdermap.com Example of defering a decision to mitigate risk Deciding to delay the selection of a software solution in order to configure a proof of concept illustrating how the software could meet key business requirements. Effect on risk: Action on likelihood Action on impact Action on proximity
Limit or reduce the risk	Limit or reduce the risk - Safeguards are put in place to limit or reduce the potential impact of a risk or the likelihood of the risk occuring. stakeholdermap.com Example of actions taken to limit or reduce a risk Authorising project expenditure by phase for example authorising expenditure on a feasibility phase rather than on the whole project. Safety barriers, signage and warning lights Backing up databases. Failover and redundancy processes in data centers. Effect on the risk: Action on likelihood Action on impact Action on proximity
Create a Plan B or a contingency	Risk Contingency - A plan is put in place which will be deployed should the risk occur. stakeholdermap.com This risk mitigation strategy is similar to Limit the risk and Options.. Risk Contingency example The Center Court Roof at the Wimbledon Tennis Championships allows for play to continue regardless of the British weather. Effect on risk: Action on likelihood Action on impact Action on proximity