31 Oct 2021 Ankit Chadha

Strategic Risk: How Can Businesses Manage and Mitigate It

Risk Mitigation Strategies | TRC Corporate Consulting

Strategic risks are those risks which are undertaken by a firm and can result in high profits or potential losses. However, these are directly linked to a company's goals and objectives. Acceptance of strategic risks, when framed properly, can result in extremely successful operations.

To deal with such risks, core expertise in strategic risk management is required. Every company's strategy includes a component of risk. Strategic risks will now investigate the ‘what ifs' of business operations to stress-test against external conditions. Diversification of current projects, healthy cash flow, or the ability to finance new projects affordably, and a comprehensive process to review and analyse potential ventures based on future return on investment are often included in a system established to control the financial hardship that occurs when a risky venture fails. And here, risk mitigation strategies play an important role.

What is Strategic Risk Management? 

The process of identifying, assessing, and reducing any risk that affects or is inherent in a company's business strategy, strategic objectives, and strategy execution is known as strategic risk management. These dangers could include:

  • Consumer demand and preferences are changing.
  • Changes in the law and regulations
  • Pressure from competitors
  • Integration of mergers
  • Changes in technology
  • Senior management changes frequently
  • Pressure from stakeholders

What is Risk Mitigation? 

The process of planning and implementing strategies and solutions to lessen risks and maintain company’s objectives is known as risk mitigation. Risk mitigation strategies may be used by a project team or a firm like TRC Corporate Consulting that helps identify, monitor, and evaluate risks and repercussions associated with completing a given project or a new goal of the company.

What are the Risk Mitigation Strategies? 

A few basic yet effective basic risk mitigation strategies are as follows:

  1. Risk Acceptance 

Acceptance of risk boils down to ‘taking a chance.’ This risk mitigation technique accepts that the risk exists and that there is nothing to do to reduce or eliminate it. Instead, this mitigation strategy recognises the likelihood of it occurring and accepts the potential repercussions. When the danger is modest or unlikely to occur, this is the ideal risk mitigation strategy. When the cost of minimising or avoiding risk is more than the cost of taking it and leaving it to chance, this risk mitigation strategy is worth a shot.

  1. Risk Avoidance 

This risk mitigation technique signifies that if a risk associated with initiating a project or moving your firm is too great to bear, it may be preferable to avoid it. This risk mitigation technique entails refraining from engaging in risky activities. This mitigation strategy to risk management is most similar to how people deal with personal risks - while some people prefer to take risks and consider them as opportunities, others prefer to avoid them.

  1. Risk Mitigation 

This mitigation strategy suggests that when risks are assessed, some hazards are better avoided or accepted than others. This risk mitigation technique is focused in risk reduction strategy. The processes and methods of risk control are referred to as risk mitigation. You can hire firms like TRC Corporate Consulting for risk management once you've identified the risk and its likelihood.

  1. Risk Reduction 

This risk mitigation strategy exclaims that businesses can set a risk tolerance level, which is referred to as the residual risk level. There is always a risk reduction strategy that entails taking steps to mitigate the effects of the consequences.

  1. Risk Transfer 

This mitigation strategy entails transferring the risk to a third person or institution. Outsourcing or transferring risk to an insurance agency/ a new company are some of the options. This risk mitigation process does not necessarily lead to cost savings. However, it is the best mitigation strategy when a risk transfer can be employed to reduce future damage. Henceforth, while insurance can be costly, however, it may be more cost-effective than risking it and being completely responsible for the consequences. This helps in risk reduction strategy.

What is the Risk Mitigation Process? 

The risk mitigation plan starts where most enterprise risk management (ERM) programmes end. The risk mitigation strategies use the risk mitigation technique of reporting and analysis to mitigate the potential risk.

A vital component of effective mitigation strategy is the establishment and specification of a guided roadmap to execution, in addition to formally documenting prospective areas of attention through risk assessments. This roadmap of risk mitigation plan serves as a risk mitigation strategy to ensure proper resource allocation, deliverable dates, and a definition of success for mitigation strategies/ initiatives.

What is a Risk Mitigation Plan? 

A risk mitigation plan contains various risk mitigation techniques and risk mitigation strategies to reduce the risk or handle the risk as a potential opportunity. The risk mitigation plan can be formulated in the following manner:

  • Recognize the users/ consumers and their requirements;
  • Seek out and employ specialists;
  • Recognize recurring potential risks;
  • Encourage risk-taking;
  • Identify opportunities out of those risks;
  • Encourage thoughtful examination of mitigation strategies/ alternatives;
  • Not all risks necessitate mitigation strategies or a risk mitigation plan.

The risk mitigation plan content should enhance and focus on the following points:

  1. Appoint a Risk Manager 

The risk manager is in charge of identifying and putting the risk mitigation plan into action. He/ she must possess the necessary knowledge, authority, and resources to carry out the mitigation strategy.

  1. Create a Risk Mitigation Plan 

This is a broad risk mitigation strategy that results in risk reduction and severity and/or likelihood of a risk impact. It could have an impact on a variety of risks.

  1. Determine the Risk Mitigation Strategies and Steps 

While implementing the risk mitigation plan, enquire and cross-check the following questions- What steps should be taken? When do actions have to be completed? Who is the person in charge of the responsible action? What are the resources required? What effect will the mitigation strategy have on the severity of impact?

 

Is There Any Relation Between Risk and Mitigation? 

Yes, there is a co-relation between risk and mitigation. If risks are involved, there is always a need of risk mitigation strategies.

Here is how you can devise a successful risk mitigation plan:

  • To implement and have a successful risk mitigation plan, always monitor the risks and manage it regularly with appropriate risk mitigation techniques.
  • Risk assessment should be a normal aspect of programme evaluations.
  • Risk reduction strategy should be implemented continuously rather than just before a potential risk.
  • Review and track the progress of risk mitigation initiatives. Determine the timeframe for each action to be done effectively.
  • As needed, refine and redefine risk mitigation strategies and risk mitigation action plan stages.
  • As risk mitigation plans are finished, revisit the risk analysis.
  • Last but not the least, always assess the influence on the mitigation strategy’s critical path.
  • Re-evaluate the mitigation strategy regularly and examine the current environment for potential risks or changes to existing ones.

How to Convert a Strategic Risk into an Opportunity? 

  • Define company's fundamental strategy and goals;         
  • To monitor achievements, create key performance indicators (KPIs);
  • Identify potential sources of performance fluctuation;
  • Establish key risk indicators (KRIs) and critical risk tolerance levels;
  • Reporting and monitoring should be incorporated regularly.

How Can TRC Corporate Consulting Help in Devising Effective Risk Mitigation Strategies? 

Choosing the right way to handle risk can improve the performance of your company to unimaginable levels. You can do so with the support of our expert professionals, who determine the appropriate risk mitigation technique for your firm based on the upcoming or prevalent risk. Risk mitigation isn't supposed to be static, as a rule of thumb. You can test different strategy, track their progress, and re-evaluate them over time.

TRC Corporate Consulting excels in collaboration models and ensures that the risk mitigation services benefit the companies. We follow all relevant instructions and ensure that our professionals develop the most appropriate risk mitigation strategies for the concerned situation. At TRC Corporate Consulting, our goal is to provide a safe and secure atmosphere in which your company can realise its goals and desires.