Risk Mitigation Explained

Risk mitigation is a strategy employed by organisations to prepare for and lessen potential risks that a business may face. It overlaps significantly with risk reduction, where threats are identified before steps are taken to reduce these risks.

The nature of these risks can vary greatly and can include cyber-attacks, financial issues and workplace injuries and accidents.

Risk mitigation is crucial because, as part of the broader risk management process, it helps protect a business from various threats. Without mitigating risks, companies face being negatively impacted by a variety of challenges that could potentially harm workers and lead to reputational and financial difficulties. Risk mitigation is also important from a legal standpoint as companies have a legal responsibility to protect the health and wellbeing of their employees.

Risk mitigation does not aim to eliminate threats outright. Instead, it focuses on managing any risk that the organisation may face in conducting its daily activities, such as a logistics company transporting goods across the country — risks that are beyond a company's direct control. Therefore, risk mitigation involves those control measures to reduce the likelihood of a negative outcome, reducing the overall impact of these threats on an organisation.

The risks an organisation may face can vary depending on factors such as location and industry. Sometimes, these risks can overlap. For example, a compliance risk may also constitute a legal and financial risk.  Technological progress in the workplace also brings about new risks as can be seen with the rise of AI.

Here are some of the most common types of risk:

A company faces compliance risk by failing to meet internal and external policies and legislation adequately. A business that fails to comply with government regulations such as the Health and Safety at Work Act or COSHH regulations could suffer legal, financial, and reputational damage.

Legal risk is a form of compliance risk that pertains specifically to the legal penalties a business may face for violating national or international laws. To mitigate legal risks, a company should conduct regular health and safety audits that ensure organisations are complying with the law in their region. They should also provide comprehensive employee training in relation to the awareness of laws and regulations.

Reputational risks are those that could damage a company's brand. This can lead to a loss of industry standing, which in turn can result in decreased profits and loss of staff. Mitigation strategies for reputational risks include having a crisis management plan and maintaining high customer service standards to prevent issues from escalating.

Operational risks are related to the potential problems that could disrupt the everyday activities of a business, such as the risk of equipment failure that could slow or stop operations.

Financial risks, like currency fluctuations, are inherent to the core functioning of a business and can impact almost every other type of risk, including legal, reputational, and operational. This is because most risks ultimately pose a threat to the business’s financial health. Ensuring your organisation has multiple revenue streams or a healthy cash reserve are both examples of mitigating financial risk. 

Strategic risks arise from company decisions, such as flawed business plans or investments in unstable markets. These risks can be mitigated by carefully evaluating all major decisions through market research, cost-benefit analysis, and thorough discussions.

Environmental risks are those posed by natural events, such as extreme weather events or pollution, and can be heavily dependent on location. For instance, a business located near a river may be at a higher risk of flooding compared to one situated further inland or at a higher elevation.

Environmental risks can be mitigated by making sure company infrastructure is designed to withstand potential environmental impacts and by securing insurance to cover possible damage. Specialist IEMA courses can also be useful to help relevant staff understand regulatory requirements and plan strategies to minimise risks.

Risk mitigation strategies vary by industry and organizational position, but commonly include four key approaches: transfer, acceptance, avoidance, and reduction. Each method offers a distinct way to manage risks, from shifting responsibility to actively minimising potential issues.

Risk transfer involves shifting the responsibility for a risk to a third party, such as an insurance company or product supplier. By doing so, the third party assumes responsibility for any negative consequences, including financial or legal issues.

Risk acceptance is a strategy used for risks that cannot be avoided. It involves acknowledging these risks and focusing on managing other, more controllable risks. While risk acceptance may not be permanent, it is important to continuously monitor accepted risks in case mitigation opportunities arise later.

Risk avoidance aims to prevent a risk from occurring by taking proactive measures. This strategy involves avoiding activities or situations that could lead to risk. For example, choosing not to invest in a risky product or avoiding office space in a high-crime or flood-prone area are both forms of risk avoidance.

Risk reduction is the most active risk mitigation strategy, focused on taking steps to lessen the impact of a risk. This approach is usually implemented after conducting a risk analysis and focuses on controlling and containing the risk rather than eliminating it entirely.

Given the range of risks that a company can face, the process of risk mitigation will likely vary from business to business. Certain companies have even begun to experiment with AI, using it to assist the risk mitigation process.

Risk mitigation typically involves the following steps:

To mitigate current and future risks, they must first be identified. This should be a comprehensive process, considering every possible scenario, from financial losses to employee deaths.

The next step in risk mitigation is to perform a risk assessment. This means evaluating all identified risks based on several factors, including the likelihood of occurrence and the potential impact if they do occur.

Try to avoid risk assessment pitfalls, such as neglecting risks to mental wellbeing and failing to follow the hierarchy of controls.

Prioritise risks based on their likelihood and impact to determine which to address first. Your measures and mitigation strategies will depend on this assessment — low-risk threats might be accepted, while high-risk threats may require avoidance.

One of the simplest ways prioritise risks is with the aid of a risk register. Risk registers are tools that document the various potential risks an organisation might face and detail the type of risk, how likely it is to occur, its potential impact, and what the planned action is to mitigate it.

The final stage is to implement the risk mitigation plan, putting into action all the measures decided upon during the previous steps.

Briefing and training employees to respond to and manage these risks when necessary is a crucial part of this final stage. A risk mitigation plan should be adaptable, as risks can change over time.

Most risks are not static and require consistent monitoring to observe changes in their potential impact. Engaging in risk monitoring involves not only assessing new risks as they arise but also tracking how existing risks affect different business processes. Strong metrics for tracking risks, such as incident frequency and impact severity, and regular reviews are both essential to prevent forgotten risks from causing unexpected harm.

From farming to finance, there is not an industry in the world that is free from risk. Mitigating risk is one of the most important things a company can do to keep itself and its employees safe. That’s why, here at the British Safety Council, we offer a risk assessment course to help you keep your workplace, and its workers, safe. With over 65 years of experience as a trusted provider of health and safety education, British Safety Council courses offer exceptional tutorial support and a wealth of educational resources, resulting in outstanding pass rates.