Risk is an inevitable part of every major business decision. Whether you are embarking on a new project or implementing a new policy, risk is inherent. Even passing up an opportunity owing to its riskiness can prove hazardous for your business.
That’s where risk mitigation strategies come into play. Risk mitigation is the process of recognising, evaluating and minimising any threats/risks that can affect a company’s objectives and growth. These risks can include competitive pressure, stakeholder pressure, shifts in consumer preferences and demand, merger integration, regulatory changes, technological changes and more.
Here are our top tips for creating effective risk mitigation strategies:
Define company objectives and strategy
Businesses use an array of frameworks to plan strategy including SWOT analysis, and holistic balanced scorecards. No matter how effective these frameworks are at assessing results, they completely fail to address risk. Therefore, you must take additional measures to address risk during the planning process.
Measure results using key performance indicators (KPIs)
The best KPIs are those that help find areas that need improvement. Consequently, total sales is a highly ineffective KPI whereas sales per customer allows you to dig deep and find answers. When it comes to risk mitigation, aim to identify KPIs that allow you to improve your numbers.
Understand your customers and their needs
Knowing your customers and their requirements is an essential step to mitigating risk effectively. After all, they are at the center of your business. Without customers, your business won’t survive. Hence, consider the needs of the end user when evaluating risks.
Acknowledge that risks exist
As a business owner, the biggest mistake you can make is never accepting that risk exists. That’s a perspective that’s neither realistic nor does it help anyone. By identifying, defining and addressing risk, you are preparing your managers and team to appropriately handle and deal with the various risks that your business is exposed to.
Create key risk indicators (KRIs) for critical risks
When it comes to critical risks, it’s best to be prepared. Be sure to identify KRIs and tolerance levels. While KPIs measure past performance, KRIs provide a hint about the future that helps you to anticipate possible obstacles. Tolerance levels allow you to take the necessary action.
Offer integrated reporting and monitoring
A business must regularly monitor the results and key risk indicators (KRIs) regularly and proactively. That’s the best way to minimise risks or at the very least identify unexpected opportunities as they crop up.
Contact Evocatus for support
Your business will always face risks but by taking effective measures to mitigate those risks, you can minimise downside exposure whilst growing your business.
Here at Evocatus, we can help your business create effective risk mitigation strategies through our range of consulting services. Our qualified team will deploy a range of exercises and rehearsals to ensure that you get every stage of your risk management strategy right.