What are the most cost-effective ways to mitigate risk?
Risk management is the process of identifying, analyzing, and responding to potential threats that could harm your project, business, or organization. It involves planning, implementing, and monitoring actions that can reduce the impact or likelihood of negative events. However, not all risks can be eliminated or avoided, and some risk responses can be costly or impractical. Therefore, it is important to find the most cost-effective ways to mitigate risk, which means to reduce the severity or probability of an adverse outcome. In this article, we will explore some of the best practices and strategies for cost-effective risk mitigation.
The first step in risk mitigation is to identify and prioritize the risks that you face. You can use various tools and techniques, such as brainstorming, surveys, interviews, checklists, SWOT analysis, or risk registers, to collect and document the potential sources of uncertainty. Then, you can assess the impact and likelihood of each risk using qualitative or quantitative methods, such as scoring, ranking, rating, or probability-impact matrices. This will help you to determine which risks are the most critical and urgent, and which ones can be accepted or ignored.
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Himanshu Pandya, CFA
Founder @ HP Private Wealth Advisory Services | CFA Charterholder
The simplest (though not the best) definition of risk is deviation from expectation. The extent, pace and impact of a deviation is what characterises a certain risk. Risk is not always bad; it is sometimes an opportunity. But how can one tell? In my opinion it is important to define every identifiable risk through the parameters of impact and cost of mitigation. If one can mitigate a risk, reverse a risk and manage the same on an ongoing basis, it may be a risk worth taking. But the risks that need to be absolutely avoided are what I call EXISTENTIAL risks. For instance when a trader blows up the account and loses all her capital. Or a Head of State slips into an irreversible war. So it is important to identify grades of risk.
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Payal Saini (PMP)(PSM I)
LinkedIn Top Project Management Voice | Project Coordination I Change Management & Process Improvement | Stakeholder Management | Budget Control & Resource Optimization
Begin by conducting a thorough risk assessment, categorizing potential threats based on severity and likelihood. Prioritize those with the highest impact on objectives. This targeted approach allows resources to be allocated efficiently, focusing on critical areas. Regularly reassess and update risk priorities to adapt to evolving circumstances. By honing in on the most significant risks, organizations can tailor mitigation efforts, optimizing cost-effectiveness and safeguarding against potential disruptions.
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Leonardo Mousinho
Head of Marketing & Sales | Commercial | Commercial Excellence | Business Transformation | Go-to-Market Strategy | Healthcare | High performance team
Mitigar riscos de maneira eficiente requer uma abordagem estratégica e ampla. Identificar e priorizar os principais riscos do negocio é essencial, permitindo que a organização concentre recursos e sua atenção, onde são mais necessários. Além disso, criar mecanismos eficazes de monitoramento (KPIs), envolver proativamente a equipe na gestão de riscos e estabelecer ciclos de aprendizado contínuo são passos cruciais. Ao ampliar a participação da equipe e aprender com cada desafio, não apenas reduzimos custos, mas também fortalecemos a resiliência organizacional. Vale destacar que ao encorajar riscos (calculados), cultivamos uma cultura que abraça a inovação e o crescimento sustentável. Não seja avesso ao risco, são importantes ao crescimento.
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Sami Ullah Khan, ACA
Chartered Accountant | Audit | Financial Management | Risk Management | Compliance | Advisory Services
The most cost-effective ways to mitigate risk often involve a combination of proactive measures. These may include thorough risk assessment and management strategies, diversification of investments or resources, implementing robust contingency plans, leveraging insurance where applicable, maintaining strong internal controls and compliance frameworks, and investing in technologies or systems that enhance security and resilience. Additionally, fostering a culture of risk awareness and accountability within an organization can significantly contribute to minimizing potential losses while maximizing opportunities for sustainable growth.
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Osama Mohammed أسامة محمد
Advancing Organizational Excellence at CBI | Implementing Quality Guidelines, Enhancing Service Quality, and Streamlining Processes
Fostering a proactive risk culture by involving stakeholders at all levels can ensure comprehensive risk identification and alignment of mitigation strategies with organizational goals.
The next step in risk mitigation is to choose the appropriate response for each risk. There are four main types of risk responses: avoid, transfer, reduce, or accept. Avoidance means to eliminate the risk by changing the plan, scope, or strategy. Transfer means to shift the risk to a third party, such as an insurance company, a contractor, or a partner. Reduction means to implement actions that can lower the impact or likelihood of the risk. Acceptance means to acknowledge the risk and prepare for the consequences. The choice of response depends on the cost-benefit analysis, the risk appetite, and the available resources.
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Diogo Nogueira
Risk Management | Audit | Corporate Governance | Compliance & Internal Controls
A melhor resposta ao risco mais crítico identificado sempre vai ser considerado uma análise assertiva do custo benefício. É mais econômico aceitar o risco ou transferir? Ou controlar? Tudo vai depender da equação mais equilibrada entre custo x benefício.
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Umesh Bankatti
Senior Business analyst | Credit Agricole CIB | Market Risk | FRM L1 | 2X Top Risk Management Voice |MSc Investment Management | Middlesex University | Ex- BNP Paribas
In the process to mitigate risk after identification and prioritization we need to choose appropriate response according to risk appetite of business. Basically, a risk manager can transfer a business risk by purchasing an insurance for the business so that the credit loss is transferred to another party (insurance company). As mentioned previously, the known risk can be accepted since the likelihood of impact would be very minimal. The risk manager are also highly qualified to reduce the risk by using multiple investment strategies to minimize the business loss. In reality the risk manager needs to have proper research reports and understanding on macro-economic and micro economic factor globally to place a right strategy.
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Adrian Dunkley
Catalyst for Smarter Innovative Companies | 2023 Innovator of the Year, JA | Caribbean AI Founder of the Year, 2023 | Jamaica's AI Task Force | LinkedIn Top AI Voice
Start with low-cost foundational measures that are appropriate and reduce the likelihood of risks and then assess whether additional protection offered by more expensive measures justifies their cost based on the organization's specific risk profile and tolerance.
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Michael L. Woodson
Cybersecurity & Cyber Resiliency Executive | Speaker & Author | Former Law Enforcement | Servant Leader | Mentor I CISM, C|CISO, CDPSE
Implementing these strategies requires a proactive and ongoing effort. It's also essential to foster a culture that values risk management and encourages the identification and communication of potential risks.
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Robert Utton
Founder @ Crafted Edge | Global Risk Management Expert
Selecting the right risk response involves choosing from avoidance, transfer, reduction, or acceptance. Avoidance changes plans to eliminate risk, while transfer shifts risk to a third party like insurers. Reduction involves actions to lessen risk impact or likelihood, and acceptance means recognising and preparing for the risk's consequences. The decision depends on a cost-benefit analysis, the organisation's risk tolerance, and available resources. Each strategy has its context where it's most effective, balancing risk management with strategic objectives and resource allocation. This ensures that responses are both practical and aligned with the organisation’s goals, optimizing the approach to risk mitigation.
The final step in risk mitigation is to implement and monitor the response. You need to assign roles and responsibilities, allocate resources, and communicate the plan to the relevant stakeholders. You also need to track and measure the effectiveness of the response, using indicators such as key performance indicators (KPIs), milestones, or feedback. You should also review and update the risk register regularly, as new risks may emerge or existing risks may change over time. You should also document and share the lessons learned from the risk mitigation process, to improve your future practices and decisions.
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Osama Mohammed أسامة محمد
Advancing Organizational Excellence at CBI | Implementing Quality Guidelines, Enhancing Service Quality, and Streamlining Processes
Establishing a structured lessons learned repository can facilitate continuous improvement by capturing insights and best practices from past risk mitigation efforts, fostering a culture of organizational learning and resilience.
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Diogo Nogueira
Risk Management | Audit | Corporate Governance | Compliance & Internal Controls
Feito as implementações devidas e direcionado os esforços para as melhores respostas considerando os custos x benefícios a serem gerados, a última etapa é o monitoramento periódico e reporte às alçadas devidas, responsáveis por aqueles determinados riscos. O uso de indicadores-chave de riscos (KRIs) ajudam bastante neste monitoramento.
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Umesh Bankatti
Senior Business analyst | Credit Agricole CIB | Market Risk | FRM L1 | 2X Top Risk Management Voice |MSc Investment Management | Middlesex University | Ex- BNP Paribas
As per my view in order to mitigate risk of business the risk manager has to implement multiple response according to its risk appetite and monitor its impact on timely basis. In financial service business, the risk/fund manager has to very proactive in understanding different risk parameters like market risk, credit risk, operational risk and liquidity risk. They need to track and measure these different parameters with certain benchmark and key performance indicators so that the portfolio of business remains within risk appetite. Recently climate risk has emerged in larger scale hence they need to implement the strategies which is sustainable in long term for business.
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Robert Utton
Founder @ Crafted Edge | Global Risk Management Expert
Implementing and monitoring the response is crucial in risk mitigation. This involves assigning roles, allocating resources, and communicating the plan to stakeholders. Tracking effectiveness through KPIs, milestones, or feedback is essential for adjusting strategies. Regularly updating the risk register is necessary to adapt to new or evolving risks. Documenting and sharing lessons learned enhances future practices and decision-making. This comprehensive approach ensures risk mitigation efforts are effective, relevant, and continuously improved, fostering a proactive risk management culture within the organisation.
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Muhammad Luqman
Airside Operations ✈️ Airside Safety 🚧 || EHS 🌿 OHS 🛡️ Sustainability 🌱 || Operations Assurance 🛠️ || Risk Management 🔍📊 Regularity Compliance 📜🔍⚖️ || ICAO Certified Training Instructor 🎓 ||
Once you've selected your response strategy, it's time to put it into action. Implementation involves executing the plan you've devised to mitigate the identified risks. This could include establishing new protocols, investing in technology, training staff, or any other measures you've decided upon. Monitoring is equally crucial. It's about keeping a close eye on how well your response is working. Regular checks and evaluations help ensure that the chosen measures are effective and that they're addressing the risks as intended. Adjustments may be needed along the way based on new developments or insights gained through monitoring. The goal is to maintain a proactive stance, refining your approach to risk management for optimal outcomes.
One of the most cost-effective ways to mitigate risk is to use risk management software. Risk management software is a tool that can help you to automate and streamline the risk mitigation process. It can help you to identify, analyze, and prioritize risks, using data and algorithms. It can also help you to choose, implement, and monitor the best risk responses, using templates, workflows, and dashboards. It can also help you to collaborate and communicate with your team and stakeholders, using features such as chat, email, or notifications. Risk management software can save you time, money, and effort, by reducing human errors, enhancing efficiency, and increasing visibility.
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Umesh Bankatti
Senior Business analyst | Credit Agricole CIB | Market Risk | FRM L1 | 2X Top Risk Management Voice |MSc Investment Management | Middlesex University | Ex- BNP Paribas
As per my view in order to mitigate risk we should make use of tools and technology which provide better estimates to chief risk officer(CRO) to implement various strategies. In high frequency trading business, the risk manager uses high end trading terminals which works on Machine learning models and Artificial Intelligence (AI) to place different strategies as per the risk limits of clients. By using this high-end risk management software, the risk managers are in better states to identify and prioritize risk. They receive real time notifications to place different trades as per their clients requirements. Risk management software also needs to be updated on timely basis due to increasing vulnerabilities and updating features.
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Victor Ávila, PQO
Operational Risk & ESG Sr Analyst | Internal Controls | CPA20 | PQO | IELTS
An easy and cost-efficient way of managing risk is knowing and using the tools that are already available in your company. For example, Microsoft Office offers a wide variety of tools that can be used to mitigate risks. Power automate, for instance, is an user friendly tool that can be used to replace manual and repetitive routines, providing a more reliable work environment.
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Robert Utton
Founder @ Crafted Edge | Global Risk Management Expert
Risk management software automates the risk mitigation process, from identification to monitoring, using data and algorithms. It enhances efficiency with templates, workflows, and dashboards for implementing and tracking responses. Collaboration features like chat and email improve team and stakeholder communication. This software reduces human errors, saves time and money, and increases visibility into risks and their management. Ultimately, it streamlines risk management activities, leading to more accurate assessments, effective responses, and cost savings, making it a vital tool for modern organisations aiming to manage risks proactively and efficiently.
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Muhammad Luqman
Airside Operations ✈️ Airside Safety 🚧 || EHS 🌿 OHS 🛡️ Sustainability 🌱 || Operations Assurance 🛠️ || Risk Management 🔍📊 Regularity Compliance 📜🔍⚖️ || ICAO Certified Training Instructor 🎓 ||
Risk management software offers a comprehensive platform for identifying, assessing, and mitigating risks efficiently. These tools centralize data, streamlining the risk management process. By leveraging such software, organizations can improve decision-making by accessing real-time risk information and analysis. Additionally, these platforms often provide customizable dashboards and reporting features, enabling clear communication and collaboration among stakeholders. Automated alerts and notifications ensure timely responses to emerging risks, enhancing organizational resilience. Overall, utilizing risk management software enhances effectiveness, fosters proactive risk management, and contributes to better decision-making.
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Jenna Wheeler ✨
Efficiency, Sales, Cash Flow | More Working Capital, Less Risk | Influencer for Change & Growth | More Success, Less Fear | 😉Sales & Finance Are Cool #thetradecreditgirl
Software and similar partnerships can be extremely effective in risk mitigation because they already have certain criteria in place to identify risks and you are able to pool resources this way. Anyone from a small business to a global company can benefit by employing a relevant software that fits their needs.
Another cost-effective way to mitigate risk is to involve stakeholders. Stakeholders are the people or groups that have an interest or influence in your project, business, or organization. They can include customers, employees, managers, suppliers, regulators, or competitors. By involving stakeholders, you can benefit from their knowledge, experience, and perspectives. You can also increase their buy-in, trust, and satisfaction. You can involve stakeholders by consulting them, informing them, engaging them, or empowering them. You can use methods such as surveys, interviews, focus groups, workshops, or feedback sessions.
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Helio Macedo
HSE and ESG Manager | LinkedIn Top Voice on strategic Health and Safety issues | Building a Safety Culture and an environment with High Operational Performance | Risk
Imagine que você teve um grande trabalho para levantar, quantificar e qualificar os riscos da sua empresa. ficou lindo, genial, um grande trabalho! Para quem importa esta tratativa? Quem vai dar valor ao seu trabalho? Quem será o patrocinador da sua empresa que vai ajudá-lo a eliminar e/ou tratar os riscos? Importante você se comunicar a todo tempo com os stakeholders do negócio: o cliente, áreas correlatas, seu time, gestão e riscos. Para que o trabalho no final tenha validade, peso, importância, e todos sejam "donos"do negócio (e dos riscos).
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Claudia Ramos, HCMBOK®
Aprender com as partes interessadas ou outros colaboradores, por meio de ações de Gestão do Conhecimento, é uma forma interessante e tem 0 custo!
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Robert Utton
Founder @ Crafted Edge | Global Risk Management Expert
Involving stakeholders is a cost-effective strategy for risk mitigation, leveraging their insights, experiences, and perspectives to enhance decision-making. Stakeholders, including customers, employees, suppliers, and regulators, can contribute valuable information and support. Engaging them through surveys, interviews, focus groups, and workshops not only enriches the risk management process but also boosts their commitment, trust, and satisfaction. By consulting, informing, engaging, and empowering stakeholders, organisations can ensure more comprehensive risk assessments and more effective risk responses, fostering a collaborative and supportive environment for managing risks.
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Muhammad Luqman
Airside Operations ✈️ Airside Safety 🚧 || EHS 🌿 OHS 🛡️ Sustainability 🌱 || Operations Assurance 🛠️ || Risk Management 🔍📊 Regularity Compliance 📜🔍⚖️ || ICAO Certified Training Instructor 🎓 ||
Involving stakeholders is essential for effective risk mitigation. Engaging stakeholders ensures diverse perspectives are considered, fostering buy-in and collaboration throughout the risk management process. Stakeholders bring valuable insights into potential risks, helping to identify blind spots and develop comprehensive mitigation strategies. Furthermore, involving stakeholders promotes transparency and accountability, as everyone has a shared understanding of risks and their management. Regular communication and feedback loops with stakeholders facilitate timely adjustments to mitigation plans, enhancing their relevance and effectiveness. Ultimately, involving stakeholders develops a culture of risk awareness and responsibility,
A final cost-effective way to mitigate risk is to learn from best practices. Best practices are the proven methods or standards that have been established by experts or organizations in your field or industry. They can provide you with guidance, inspiration, and benchmarks for your risk mitigation process. You can learn from best practices by researching, observing, or benchmarking. You can use sources such as books, journals, websites, podcasts, or case studies. You can also learn from best practices by networking, mentoring, or collaborating. You can use platforms such as forums, events, communities, or associations.
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Umesh Bankatti
Senior Business analyst | Credit Agricole CIB | Market Risk | FRM L1 | 2X Top Risk Management Voice |MSc Investment Management | Middlesex University | Ex- BNP Paribas
In my experience, to mitigate risk from any organization the risk officer should follow some standards or regulation laid down by the certain authorities in order to be efficient the business. Like for example each financial services firm who deals in OTC cleared derivatives has to follow some rules laid down by ISDA (international swaps and derivative association). By making use of this regulation the organization can effectively manage risk and returns of the portfolio. The organization can also learn about risk mitigation from arranging various forums and event, which gives a multidimensional and real use case of existing risk in the system.
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Oliver Bergmann
CIO, CCO, Supervisory Principal
Imagine crafting a simulation chamber, where you can dive into historical and futuristic scenarios of risk management. Utilize virtual reality to walk in the shoes of risk management pioneers, experiencing their challenges and triumphs firsthand. Engage with AI-curated interactive case studies that adapt to your decisions. Consider "risk management hackathons," inviting thinkers from unrelated fields to brainstorm novel solutions. This approach not only leverages traditional learning, but also immerses you in a multi-dimensional experience, sparking innovative ideas by connecting dots in unexpected ways. It's a journey that makes you question the conventional, encouraging a blend of historical wisdom and futuristic thinking.
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Abhijit Sanzgiri
Governance, Risk & Finance professional - Author - Blogger - Mentor - Speaker
The most cost effective way to mitigate risks is to identify risks through your employees in a simple structured manner. TAKE them to an outdoor outbound & have them brainstorm each process start to end to identify gaps, vulnerabilities & or threats or what can go wrong. Since they are people who are your backbone & supposed to do right things right, involving them by necessary motivation & inspiring them with recognition, acknowledgement, respect & encouragement with right rewards will go a long way in getting their whole hearted involvement & cooperation in the risk management process. No need for fancy frameworks or expensive consultants to write the risk register when your employees under right guidance will do the really job well.
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CA Bhavin Raithatha- CA CIA CISA CS
Senior Manager - Risk & Control at ADCB (Bank) | Internal Audit Professional
3 key aspects for cost-effective risk mitigation in my experience inclues: 1. Early risk assessment: Identifying risks during product/process/system development allows for low/no-cost control implementation.📝 2. Conflict avoidance: Assigning risk assessment to an independent expert team reduces conflicts of interest, especially when meeting project timelines.📝 3. Swift mitigation: Employing rapid detective controls becomes crucial when preventive measures aren't viable.📝 Similar to how preventive healthy habits are more cost-effective than medical treatments, early risk assessment and management follow the same principle. 🏥 #riskmanagement
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Gavin Ferreiro
Strategic, Tactical and Operational Problem solver, GRC, BCM, DRP, ITIL, Info/CyberSec Consultant
The most cost effective method of ensuring Risk Mitigation is to financially penalise the Board and Executives of the entity. Many board members and executives make decisions based on perceived budgets and risks, they ensure that the profit objectives of the entity is met.
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Jenna Wheeler ✨
Efficiency, Sales, Cash Flow | More Working Capital, Less Risk | Influencer for Change & Growth | More Success, Less Fear | 😉Sales & Finance Are Cool #thetradecreditgirl
Proactive vs reactive. Always look ahead. Take a view from the top down and adopt risk management as a whole approach to business and not just a piece-by-piece strategy as risks become liabilities. Risk is not an issue for the direct user or consumer. Risk is an executive topic that needs to be communicated downstream. No one has more to lose from mismanaged risk than execs and owners. Expecting employees to point out or identify potential risk is overly optimistic and the view is different from the inside. Consulting with outside experts regularly can offer a direct impact to your strategy's success.
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Adrian Dunkley
Catalyst for Smarter Innovative Companies | 2023 Innovator of the Year, JA | Caribbean AI Founder of the Year, 2023 | Jamaica's AI Task Force | LinkedIn Top AI Voice
Research current events, journals, and articles. You may find an innovative cost-effective risk mitigation technique, discovered out of necessity of mistakes made by another organization, you get the learning for free
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