We’re all pretty familiar with Murphy’s Law: something that can go wrong will go wrong. Right? Well, maybe not everything will go wrong in life, but there are certainly elements of risk with most things in business. Every company will have risks that could affect business somehow. Something could go wrong, and there could be problems—sometimes really big problems—from it.
And as much as we all try, risk is like bad weather: we can’t fully eliminate it or control it. Something that can go wrong still could go wrong. But that doesn’t mean that there aren’t ways to make those consequences of risk not so bad. Like bad weather, we can be fully prepared for whatever comes our way, and so even when we can’t control if it’s going to rain, we can be prepared with an umbrella. In business, that preparedness looks like risk mitigation.
What Is Risk Mitigation?
Risk mitigation is planning and implementing strategies to make the consequences or effects of risk not as bad. Basically, risk mitigation is preparing so well for a potential risk that if it did end up happening, your strategic plan would make it so everything would still be okay. So instead of facing a disaster if a risk came to be, your company will be able to weather the storm and come out much better because you took the time to mitigate risks. That’s the essence of risk mitigation.
Why Is Risk Mitigation Important?
Risk mitigation is important because risk isn’t going anywhere. There will always be risk, and there will always be consequences and effects if something does indeed go wrong. Ignoring risk completely is also not a viable approach. Ignoring something doesn’t make it never happen, and then if something did happen, the consequences could be even worse and have drastic effects.
The best approach is to, instead, be well aware of the risks your business faces but to put a solid risk mitigation plan into place. That plan will help lessen the effects of something going wrong. With risk mitigation, you’ve made the consequences as minimal as possible. In addition, a risk mitigation plan also helps everyone at your company be on the same page about what to do. With a plan set, everyone will know who’s responsible for what, and your company will be very transparent about the risks it faces and what will happen if something goes wrong. Essentially, you’ll be able to make the risks less detrimental to your company, keep everyone on the same page, and improve company transparency. All wins, all the way around.
Types of Risk
Risks come in all shapes and sizes. But there are three common types of risks that most companies face in some form:
- Money risks. There might be the risk of a project going way over budget, a product completely failing on the market, or a pandemic cutting funding. All companies deal with cost and financial risks, and these risks can be detrimental to a company if the company isn’t prepared to mitigate those risks.
- Time risks. Maybe you face the risk of a project failing way behind schedule, a product not being ready for launch, or miscommunicated deadlines. However it looks, most companies have time risks that need to be anticipated and prepared for.
- Performance risks. Your company could face risks of subpar employee performance or poor productivity or a product that doesn’t perform up to par. Mitigation measures can help make these performance risks not so bad.
Making a Risk Mitigation Plan
Since a risk mitigation plan is key to handling risk, we’ll walk you through the process of making a risk mitigation plan for your business.
Identify Your Risks
The first step in your risk mitigation plan will always need to be identifying your risks. You can’t prepare for something you don’t know about, so you need to make sure you know about all your risks. Gather your teams together and determine what could go wrong on every project with each deadline or to the company as a whole. Gather a list of all of your risks into one main location, so you can move forward planning for them.
Assess and Prioritize Your Risks
You can’t prepare for something you don’t understand, so you need to assess and evaluate your risks. Here are the basic steps for evaluating the risks you could face:
- Set evaluation criteria. Gather everything you’ll use to evaluate your risks into one place. The evaluation criteria should be based on your business’s unique needs.
- Weight the evaluation criteria. Not every criteria would lead to the same level of consequences. Give weight assignments to each criteria, so the risks you evaluate will accurately reflect the seriousness.
- Rate and review threats. Go through and assign your weighted criteria to each potential risk. Then from there, you’ll be able to review the threats and determine which ones should be prioritized.
Thoroughly assessed risks will reveal which ones could have higher consequences. From there, your team should determine which risks are either the most disastrous and the most likely to occur. You might not need to immediately prepare for something that would only happen under unique circumstances, and you might be able to mitigate lower consequence risks later down the road. But you should make sure the immediate and big cost risks are prioritized.
Track Your Risks
Don’t let risks fly under the radar or rise in importance without you knowing. You should track your risks to make sure you know if they should be prioritized, if the consequences shift, or if a particular risk is no longer relevant. A good risk mitigation strategy will have a clear plan for tracking risks and keeping track of each part of the overall plan.
Mitigate Your Risks
Finally, you’ll need to add your mitigation strategies to your plan. These risk mitigation steps should be ways that you can reduce the bad effects of something bad happening. For example, if you are planning for the risk of a particular project getting behind schedule or over budget, your mitigation plan could include a small window of extra safety net time that if a project ran over. That way, if the project went over, you would be okay with a little extra time saved to mitigate the risk. You could also include a small extra amount of money to be saved and used only if the project goes over budget. These kinds of plans will help you mitigate risks and be prepared for disasters, delays, and bumps in the road.
De-Risk Your Business
Risk is a part of business, but it doesn’t have to be detrimental for your business. You can plan ahead with a thorough risk mitigation plan that will help your company handle risks with grace and without detrimental consequences. But you don’t have to worry about risks in your business alone—and you don’t have to spend extensive time, money, or effort crafting the perfect risk mitigation plan all by yourself. Instead, you have the opportunity to de-risk your business with HNI and work with our experts to help you manage and mitigate the risks your business faces. Contact us for a risk consultation to help you get started with risk mitigation.