Risk mitigation is the process of analyzing potential risks or threats to your business, determining their severity, finding solutions, and then creating an action plan to solve for them. Boiled down, it’s a prevention plan where you try to stop any potential risk events to minimize the damage they can do to your business. 

Risk mitigation strategies aren’t one size fits all, as no company is the same. Companies like insurance agencies or law firms may focus on data security, while production companies or construction firms others need to focus on physical safety. So while the potential risks and fixes may be similar, you should tailor your overall strategy to your specific business needs. 

Why Is Risk Mitigation Important For Businesses?

As a business owner, you likely have a lot on your plate. That’s why risk mitigation is important: it allows you to identify potential problem areas and stop them before you have to eat the cost of a preventable mistake.

A good business risk management strategy will protect many of your business’s most important factors, like your reputation, time, money, and assets. 

Basically, by enacting good mitigation strategies, you can avoid an embarrassing blunder that may make your customers or clients wary of your brand. A good risk management plan keeps projects running on time and even keeps your documents safe. 

Risk Types You Might Encounter

Risk mitigation is important because, in the fast-paced world of business, risks may pop up at any moment. You may run into several types of risks, or even multiple at once.

Risks you may experience in business include: 

• Financial: A potential loss due to a financial or economic disruption such as a market downturn, loss of business, or volatile market conditions. 
• Reputational: A potential loss of trust between yourself and your customer base due to an error, bad service, a data leak, etc. 
• Compliance: A potential violation of compliance laws or breach of internal or external regulation, which may result in legal action or financial penalties (companies using AI may want to focus here). 
• Legal: A violation of federal or state laws for companies, which may result in legal action or fines. 

4 Risk Mitigation Strategies 

The key word in “risk mitigation” is “mitigation:” You don’t have to put pressure on yourself to solve all of your problems at once. So if it seems overwhelming to try to beat back every single potential risk, mitigation is really all about analyzing, prioritizing, and fixing. 

1. Avoidance

With a risk avoidance strategy, you attempt to completely stop the potential risk before it occurs. Therefore, it should be used for risks that have a serious outcome, like a fine or a missed deadline with an important client. With a risk avoidance strategy, you throw everything possible at the problem to completely solve it. 

Example: You notice a deadline looming and the project is nowhere near complete. You move someone off a different project that is less important to make sure the most important project is completed on time. 

2. Reduction 

A risk reduction strategy notices a potential risk and attempts to minimize the likelihood it will happen or the damage it will cause. Usually, this means that you’ve spotted a potential issue that could arise (but also may not), and have decided to put some action in place to make it less likely it’s going to happen. You could also put safeguards in place that make it so, in the event it does occur, the negative impact won’t be as serious. 

Example: You install fire sprinklers in your office to reduce the damage that a fire could do. 

3. Transference 

Risk transference involves bringing in a third party to shoulder some of the consequences that a particular risk may incur. You can do this by hiring a third-party agency, or working a risk transference clause into your contract with a client or customer. Essentially, you make it known that you’re aware of the risk and are not responsible if it comes to pass.

Example: You hire an insurance company to pay for claims related to accidents, natural disasters, and more. 

4. Acceptance 

This is where a “no risk, no reward” philosophy comes into play. With risk acceptance, you analyze the risk and decide that the potential reward is greater than the fallout of the potential risk, and therefore it doesn’t make sense to take any action to minimize the risk. Essentially, you’re accepting that you may suffer a small loss if the unlikely risk were to occur. 

Example: You want to raise your prices, but know that this will drive some customers to a competitor. Still, you think the benefit of the raised prices outweighs the loss of income for customers who will leave. 

Making a Risk Avoidance Plan

Like we said earlier, no two businesses will have the same risk mitigation strategy. A customer service team for a travel company probably won’t need to worry about complying with HIPAA, while a hospital administration team won’t have to worry about customers complaining about the rising cost of flights.

So when you make your risk avoidance plan, make sure you take your individual business needs into account and solve for them specifically, that way you’re identifying and solving for risks that may actually come to pass. 

The basic structure for risk mitigation is: 

1. Identify all potential risks in areas like compliance, service, finance, regulation, etc. 
2. Conduct a risk assessment to determine how serious they are
3. Sort them into avoid, reduce, transfer, or accept
4. Come up with solutions for risks you want to act on

Tools For a Safer Business

Innovations in cybersecurity, workplace safety, and technology have made it easier than ever to mitigate risks for almost every type of company. So when conducting your risk assessment and developing your mitigation plan, consider how technology can help you reduce any potential losses you might experience. 

Some tools you can bake into your risk avoidance strategy include: 

1. Rev VoiceHub: Record and transcribe meetings in a safe, encrypted platform to keep a written record of what happens at your company, improving productivity while also holding yourself and your clients accountable. 
2. Monday.com: Use their interactive risk register where you can assign identified risks to different team members for them to monitor. 
3. StandardFusion: A devoted regulation and compliance tool that specializes in risk management and creating a risk-aware culture at your company. 

Why Take the Risk?

Risk mitigation helps take the fear of a potential risk and turn it into a manageable and solvable problem. And if you choose to outsource your risk management process it’s important to know that you can trust the company you hire. 

Here at Rev, not only can VoiceHub help reduce risk by keeping clear records of your meetings that you can look back on to hold yourself and your clients accountable, but we also prioritize security by encrypting your data and protecting your account with multiple layers of protection. 

‍See how Rev can help your company