Bonus Material: 5 Steps To Better Risk Management
Risk is everywhere which means that it is so important to implement the best risk mitigation strategies.
If we never did anything to try to stop the negative effects of those risks from manifesting, it would be detrimental on society to a point of no return. There are as many ways to mitigate risk as there are types of risks, so how do you determine which strategy is best?
One risk mitigation strategy being carried out by governments alike that has become a critical, component of today’s world is requiring people to wear masks. The goal behind mask mandates is to reduce the risk of the coronavirus and reduce COVID-19 infection rates.
According to the CDC, there is a growing body of evidence that cloth face coverings provide source control – that is, preventing the person wearing the mask from spreading COVID-19 to others. Wearing a mask has been shown to have a significant impact on slowing the spread of the virus. While enforcing masks is not the total solution for ridding the virus, it can be viewed as an essential part of larger risk management planning.
This guide will dig into reducing risk within the context of a professional organization. It will provide a definition, list examples of common strategies and explain how to determine the best mitigation strategy for any particular risk. It will also touch on risk evaluation strategies, and offer solutions for effectively mitigating risks at your organization as part of your risk management program.
Risk mitigation is defined by the processes you carry out in order to reduce risk and minimize the likelihood of an incident occurring. Mitigating risks means ensuring your business is fully protected; this means consistently addressing your top risks and concerns. Mitigating activities are often referred to as “controls,” or procedures that regulate and guide an organization.
To better understand what this means, let’s look at it in relation to the entire ERM process. Your controls are born out of your risks, and your overall goal is to prevent certain risks from materializing. This leads you to develop policies and procedures to help decrease the likelihood of risks materializing, eliminate the chance for it to materialize at all, or increase the likelihood that your processes will protect you should the risk eventually materialize.
Best Risk Mitigation Strategies
At any given point, any organization faces a myriad or risks. They face more risks when embarking on anything new (like a project or initiative), or experience any sort of change within their organization. These inherent risks are generally tied to the processes that are involved in the completion of the end goal. However, there are strategies to reduce the risk of events occurring that can be used to identify and inform betting risk mitigation planning.
That said, the four common strategies are:
#1: Risk Mitigation
Believe it or not, mitigating a risk is also a more specific strategy within the more overall practice of mitigating risk. Someone would be best suited to go down the route of mitigating a risk if the risk level is out of tolerance and controls need to be put in place.
#2: Risk Acceptance
This refers to not putting any controls in place, but rather trusting that the current risk level is within your determined tolerance. This strategy can be used to identify risks in order to ensure certain risks don’t materialize; for example, projecting budget, which in turn lowers the risk of going over budget. This ensures that your team is made aware of the risk and possible consequences.
#3: Risk Transfer
The transference strategy is another of our risk mitigation strategies and this refers to when an organization or team within an organization shifts the strain of a particular risk, as well as the consequences of that risk, onto another party. One of the most common examples of this is buying insurance. It’s critical that in this strategy, all parties involved accept the terms.
#4: Risk Avoidance
In short, this is the act of avoiding the actions that are suspected to bring on a particular risk. One way of implementing avoidance is to avoid scheduling issues. To do this, you would identify issues that could come up that may affect the timeline of a project (important deadlines, due dates and delivery dates). Some risks may include being overly optimistic about a timeline, scheduling conflicts and poor time management. You could counteract those risks by creating a managed schedule that illustrates specific time allowances for every aspect of the project.
What is the Best Risk Mitigation Strategy?
Naturally, the best strategy depends on the risk you are looking to mitigate. A good rule of thumb for selecting which strategy to go with is by starting by conducting a risk assessment. This will help you identify gaps between policy and activity. Based on this feedback, you can accurately prioritize your efforts.
To learn more about crafting the risk assessment that’s right for your business, click here to download our eBook, “5 Steps to Better Risk Assessments.”
Implementing A Risk Evaluation Strategy
Risk evaluation is an essential part of the risk assessment process. It refers to the quantitative aspect of the assessment, whereby you determine the seriousness of a risk in relation to other risks. Let’s take a look at some examples or risks and determine how they would be ranked in a risk evaluation. These examples fall within the context of returning to work amidst the pandemic:
Risk: An external hazard, such as inadequate policies and procedures to prevent the spread of the virus to both employees and visitors:
Risk: A consideration for people and staff competencies, an increased rate of worker absenteeism.
Risk: With regards to third party vendor distribution, interrupted supply chains or delayed deliveries.
Of course, these results are hypothetical and would be unique to whichever organization is conducting the evaluation. These numbers would not apply to another company who had different processes, limitations and competencies.
What is the Best Risk Evaluation Strategy?
So how do you determine the best risk evaluation strategy for your ERM program? At its core, the goal of risk management is to make better decisions to add business value.
Better decision making requires transparency into all risk information gathered at your organization. It also requires the ability to prioritize that information by evaluating the risks related to organizational goals, resources, controls and monitoring. Risk assessments and evaluations add priority to these activities, helping you understand how critical each one is.
Risk Mitigation Solution
Today’s technology can help your organization perfect your strategies. LogicManager offers a risk mitigation platform that will empower you to identify, evaluate and monitor risks to enrich your business. By leveraging our software, you will be able to make connections throughout your organization by linking controls to risks, activities, policies, procedures and more to track their effectiveness.
Identifying gaps in your program
It’s one thing to address the risks in your organization, but it’s another to address the continued effectiveness of your efforts. LogicManager’s risk dashboards and reports automatically identify misalignments and ineffective controls. This can help you with identifying essential gaps in your organizations risk management program.
Helping you centrally manage information
Define and document your strategies by building a searchable repository of operational and procedural activities. LogicManager ensures the right people are looking at the most relevant information by highlighting controls, priority levels, historical changes and due dates.
Enabling you to connect risks
LogicManager connects the dots between controls and their effects on each business process. Our taxonomy technology connects activities to the departments, resources and people they depend on through one centralized repository.
While there are many different strategies involved within your larger risk management program, LogicManager can help determine what’s right for you. Connect with us today and learn how our dedicated team of Advisory Analysts paired with our technology can help you mitigate risks today and help with your risk analysis.