Unsure of how to implement adequate risk mitigation strategies? Here are 5 actionable steps to help your business navigate potential risks and get your business back on track.
With uncertainty and apprehension rife across all spectrums, businesses are treading unfamiliar waters and tackling unforeseen challenges posed by the ongoing pandemic. However, investing in sound risk mitigation strategies will help your firm stand the test of time, regardless of the constraints you face.
Read on to learn more about how you can implement key risk mitigation strategies to help prepare your company against unanticipated happenings.
What is Risk Mitigation?
Risk mitigation is a process through which organisations first identify their most imminent, high-impact risks and subsequently introduce measures to minimise the impact of these risks or eliminate the likelihood of them actualising entirely.
5 Risk Mitigation Strategies
1. Redistribute Current Resources Conservatively
For risk-averse firms, it is wise to remain conservative in managing cash flows, especially when operating in turbulent markets. Control the impact of potential risks by adopting a triage system to prioritise risks and make suitable decisions to address them accordingly.
In addition, diversifying your risks among different projects or divesting investment-heavy ventures with low returns can ensure a good liquidity position. Economising on superfluous costs, it is always advisable to have sufficient cash reserves in case of immediate, unforeseen expenses.
Finally, put your firm in a favourable position by redistributing your resources in order to support the more lucrative avenues of your business, thereby ensuring operational stability.
2. Outsource Whenever Possible
This is a classic example of risk transferal. Smaller companies are at a disadvantage when it comes to procuring the resources needed to manage multiple stages of operations, especially in times of financial constraints.
Centralise your operations around a few key business activities and consider outsourcing the rest. A possible avenue for risk mitigation is initiating partnerships and joint ventures with firms that have expertise in areas that may be of benefit to you. Insuring against certain risks is also suggested, so be on the lookout for different insurance coverages and find the most appropriate policy to mitigate the most imminent risks.
3. Implement Comprehensive Regulations & Policies
Employees are arguably one of the most valuable assets to a company. Diminishing employee productivity and morale can pose significant risks for business continuity, if not effectively addressed. Luckily, most risks associated with employees – such as company liability, or cybersecurity attacks – can be mitigated with the implementation of concrete company policies and adequate training (think gender equality, diversity training, sexual harassment awareness training).
Be mindful of the possibilities for miscommunication while you design a plan of action – clear priorities and contingency plans are essential. Prepare for the long haul and facilitate an environment where productivity and morale are not hampered. Establish a transparent platform to address concerns and seek immediate feedback on the actions taken to resolve them.
4. Adopt Flexible Business Operations
Flexibility is key and businesses must focus their processes around this mantra. Identify and evaluate the opportunities brought about in times of crisis and design strategies to bridge the gaps.
In the present case scenario, with limited face-to-face interaction becoming the norm, companies should consider taking advantage of the shift to technology and digitalise their operations – everything from collaboration tools, instant messaging apps, and project management platforms.
In the same vein, firms can also consider automating tasks in departments such as sales and HR to speed up workflows and increase efficiency. For example, by taking advantage of the plethora of sales tools available, you can drive sales and engagement rates despite the existing physical constraints. This strategic change could prove useful to the overall functionality of your business as well.
Managers should also review global industry reports to stay informed about international best practices. This gives you a tried-and-tested approach to help integrate new practices into your operations for the best possible results.
5. Be Open to Accepting Some Risks
A deceptively effective strategy, firms must be able to recognise that not all risks are meant to be avoided or eliminated. Some risks are low-impact with minimal probability of actually materialising. In fact, these risks may cost more to mitigate as opposed to accepting them.
In such cases, it can be a more cost-effective option to absorb the risks by simply setting aside a small reserve for additional funds or by establishing better monitoring systems. This would allow you to allocate resources efficiently to tackle more imminent risks that are of higher impact, permitting your business to be more prepared in the case of adversity.
With change being an inevitable driving force, difficult times require difficult decisions. In order to mitigate and manage risks in a proactive manner, determine your risk appetites in order to develop effective practices. Observe, adapt and upgrade to get your business on the path to success.