Running and growing a business often feels like you’re taking two steps forward and one step back in a battlefield with hidden landmines that you constantly have to tip-toe around. Some days everything goes well. Other days, you’re reminded of just how much is out of your control.
Unforeseen challenges and uncertainties can pop up at any time – often when you least expect them. These hurdles, which we label “risks” in the business world, can take your best-laid plans and crumple them up like a piece of paper. This is where it helps to have a risk mitigation plan in place.
What Goes into a Risk Mitigation Plan?
At its core, a risk mitigation plan is based on a structured approach that businesses use to identify, assess, and minimize risks that could negatively impact their operations or goals. Instead of just identifying risks, a risk mitigation plan is designed to counteract these risks and lessen their impact if they do come to fruition.
If you’re someone who likes to think in practical terms and analogies, think of a risk mitigation plan like the safety systems within your car. Your car is equipped with seat belts, airbags, and possibly even collision sensors and other advanced safety features. On a normal drive around town, you don’t need any of these things. When you drive safely from point A to point B, you might even consider these features a waste. But they don’t exist for “normal” safe drives. They exist for the risk of a collision.
When you do have an accident, your car’s seat belt, airbags, and other safety features step in to keep you safe. You don’t have to tell the seatbelt to get ready. And you don’t have to push a button that tells the airbag it’s time to deploy. They understand their role and automatically do their job to mitigate the risk you face.
A risk mitigation plan for your business isn’t just about ticking boxes on a checklist. It’s about equipping your organization with plans and systems that are fundamental to your long-term success in a world where risks abound.
Throughout this article, we’ll dive deeper into the essence of risk mitigation plans. We’ll explore their pivotal role for businesses, break down the core components of creating an effective plan, and provide actionable insights on how to implement these strategies. By the end, you’ll have a clearer understanding of what a risk mitigation plan entails and why it’s so vital for your business.
3 Essential Components to Creating a Well-Structured Risk Mitigation Plan
There are varying degrees of risk mitigation plans. Some are nothing more than glorified spreadsheets that an organization’s leaders come up with to appease some overseeing body or authority. Others are well-planned, articulate strategies that give key stakeholders a clear understanding of what needs to mitigated, how much it would cost (in both financial and workforce effort), what would be its return on investment, and of course, the priority of the different issues that need to be tackled. The goal is to have a risk mitigation plan that resembles the latter (not the former).
To create a well-structured risk mitigation plan, you’ll find several essential components. This includes:
Identification of Real Potential Risks
Imagine walking through a maze blindfolded. Without knowing the twists and turns, you’re bound to stumble. Similarly, the first step towards creating a robust risk mitigation plan involves identifying real potential risks that are imposed on the organization within its own context. These can include financial uncertainties, operational glitches, technological vulnerabilities, and external factors like market shifts or regulatory changes. By recognizing these risks, you can gain clarity on what you’re up against.
This is often the most intensive part of developing a risk mitigation plan. It requires thorough research and support from multiple parties. You’ll need to be aware of both internal threats and external risks.
At this point in the game, you’re just identifying and documenting potential risks. Anything goes. Don’t worry about how much of a risk it is right now. If some risk is involved, put it on the list.
Prioritization of Risks
Not all risks are created equal. Some might be more probable, while others could have a more significant impact. Evaluating and prioritizing risks involves assessing their severity, likelihood, and potential consequences.
For instance, a cybersecurity breach might pose a higher threat than a minor supply chain disruption. So you wouldn’t want to treat them equally in your approach to mitigation. You would have more emphasis on the cybersecurity breach than you would on a supply chain disruption. (This doesn’t mean you don’t plan for the latter – just that your focus has to be intentional.)
This step helps in focusing resources and attention on tackling the most critical risks first. It basically gives your list of risks a pecking order so that you know where to start.
Risk Mitigation Strategies
Once the risks are identified and prioritized, it’s time to strategize. Mitigation strategies vary depending on the nature of the risk, how much your business has to lose, and the resources you have available to use.
To mitigate the risk of a supply chain disruption, for example, you might only need to diversify suppliers or maintain certain safety stock levels. These are things you can easily do without a ton of effort. Similarly, for financial risks, hedging or insurance might be viable strategies.
When it comes to cyber threats, however, like data breaches, you may need to get more involved as mitigation actions can range from easily implemented “low-hanging fruits” to complex network architectural projects or systems’ implementation. This is where conducting cyber risk assessments and having full-fledged cybersecurity strategies in place is important.
Implementing a Risk Mitigation Plan
Once you’ve gone through the process of identifying risks, prioritizing them, and then figuring out some of the strategies you can use, it’s time to deploy. Entire books are written on how to implement a risk mitigation plan, but we’ll leave you with a few key steps involved in the process.
- Communication with stakeholders. You always want to start with engaging stakeholders in your organization. You cannot execute an effective risk mitigation plan without involving key people. Make sure everyone understands the risks, their individual roles, and the importance of following the plan.
- Resource allocation. Once responsibilities are clearly communicated, you’ll need to involve those stakeholders to understand when and where resources can be allocated. Furthermore, responsibilities have to be assigned and allocated.
- Ongoing monitoring. A risk mitigation plan isn’t a one-and-done deal. It requires consistent monitoring and periodic reviews. This allows for adjustments as circumstances change or new risks emerge, ensuring the plan remains relevant and effective.
Risk Mitigation Planning With CYE
At CYE, we use the Hyver platform to help businesses like yours implement and execute proper risk management planning. Hyver’s optimized risk mitigation provides a clear picture of the vulnerabilities that are critical to block, allowing you to manage and prioritize effectively.