Mitigation of Risk

March 20, 2016

in Manage Risk

Risk mitigation is the process of reducing our exposure to risk and it is a significant part of risk management. The core elements of risk management include: risk assessment, risk response, and risk monitoring. Mitigation is part of the response component.

Risk response can take several forms:

  • Accept – risk can be simply accepted with no further action to reduce it. This may be an appropriate choice when the risk is minimal of the cost of other actions is high
  • Transfer – taking out an insurance policy to offset the cost of a negative event is an example of transfer
  • Avoid – taking measures to reduce exposure to the area that involves the risk – an example would be moving away from a flood zone
  • Mitigate – reduce the amount of risk or the impact it can have – an example would be installing a sprinkler system to stop a fire or reduce the damage

RISK CONTROLS are carefully defined response actions. They may fit into any of the categories outlined above.

[EXAMPLE: when the risk is damage from fire, water sprinklers can be installed to reduce the amount of damage – the risk control is “water sprinklers” and it may be defined in terms of how they will be triggered, how the sprinkler heads are spaced across an area, how much water flow is needed, and more]

It is important to remember that optimization includes responses to positive events as well as negative events. For a positive event, risk response and mitigation involves reducing the risk of not fully appreciating an opportunity for gain. This is the same thing as maximizing benefit.

RELATED ARTICLES:
The Risk Management Umbrella

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