Every decision that an organization makes has some associated risks. This includes any decision that an organization makes and categorizes it as a low risky decision. Thus, risks are inevitable in any organization and business. There is a need for organizations to have risk management plans that will help them deal with risks well. Risk management first involves identifying risks. Risk identification is very important as it helps an organization to develop good strategies that it can use to deal with the risks. Secondly, risk management involves assessing risks. In this method, the organization takes some time to understand the risks better. Third, the organization should understand the risks that will be given first priority. That is the risk that will be handled first. This is determined by the intensity of the risk in case it actualizes. An organization then tries to implement various techniques that will make the risk more acceptable. Generally, there are four methods that are used in handling risks, one of them being risk mitigation. Risks mitigation refers to the act of reducing the adverse effects of risks. There are four major risk mitigation methods.
The first risk mitigation method is avoidance. This is the simplest method that exists for handling risk. This simply means the best method that can be used to deal with a risk is to avoid the risk. One of the major reasons an organization can choose to avoid a risk s f the effects of the risks is way more than the value of the benefit of the asset. One of the wats that an organization is able to avoid risk is eliminating the main source of the risk. Thus, if an organization was involved in a risky activity, it would simply stop the entire activity. With this, the sole source of the risks will be eliminated. The second method that an organization can use to avoid risk is to remove the asset’s direct exposure to the risk. A good example is that the company can change where the asset is situated to eliminate direct exposure.
The second risk mitigation strategy is acceptance. An organization chooses to accept risks, especially if the organization has assessed the risk, and it has realized that the loss that the risk will cause will be less as compared to the profit that the company will get. This means that risk is acceptable if it falls in the acceptance level. For example, a company that ships products to their customers have a risk that the customers will not receive their products. However, if the risk falls under the acceptable level, then the company ships the products. There is a need for organizations to know that if accepting the risk was based on predictions or even probability, there is a chance that the prediction might be wrong, and accepting the risk would be a bad decision. Therefore, for any activity that an organization is involved in that would have adverse consequences out of accepting a certain risk, care should be taken, and the company should take some considerable amounts of time to study the risk well.
The third risk mitigation strategy is the transfer of riks. Risk transfer involves handing over the risk to a willing third party. For example, most companies usually outsource some of their services, such as payroll services. This helps the company to ensure that they will not be dealing with the risks involved in the activity (Herrera, 2013). Thus, in risk transfer, organizations give up control, which means that the company is not responsible for the consequence whenever something goes wrong. However, this method might jot be the best, especially if the product has some association with the company.
Lastly, there is control or reduction as a risk mitigation method. This is the risk mitigation method that is mostly used in organizations and businesses. Businesses have realized that some risks are associated with specific opportunities. Thus, trying to control them can unmask new opportunities for an organization. Risks can be reduced by reducing vulnerabilities in the organization or in the information systems. Companies should note that the cost of reducing or controlling the risks should not in any way be more than the benefits. There are various methods that can be used to control or reduce risks. First, is to change the procedures that ae used to conduct a specific activity. Second is to change the physical location of the asset that is associated with the risk. Third is invest on training employees on how they can help to reduce or control the risks.
In conclusion, risks are inevitable in organizations and in businesses. The major difference comes in on how the organization or company deals with the risks. Some risks have severe consequences, while others do not. Thus, there is a need for an organization to treat all risks differently. Most importantly, before dealing with any risk, it is important that adequate time should be taken to assess the risks in order to understand their source and their consequences. This will help an organization to better handle risks.
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