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January 19, 2024

Risk mitigation strategies for project management

Project Management Risk Management
Agnieszka Sienkiewicz

Every project and day-to-day operation involves some risk. You can’t eliminate uncertainty completely, but that doesn’t mean all that you can do is brace for impact. There’s a range of risk mitigation strategies to help you measure and address potential risk consequences.

In this blog post, we’ll explore popular risk mitigation strategies that can help you build project resilience against uncertainty. We’ll also provide a step-by-step guide to building your risk mitigation strategy.

What is risk mitigation?

To mitigate means to reduce the severity of something. Mitigation doesn’t mean that you avoid risk altogether. But you reduce the impact of an event that is likely to happen. 

Risk mitigation is an active practice, a process to actively handle risk and reduce its consequences to tolerable levels.

Difference between risk mitigation and risk management

Risk mitigation is a critical step of the risk management process, together with risk identification, analysis, and assessment. In risk management, you identify risks and develop plans to avoid those risks (or reduce their likely impact).

Risk mitigation, on the other hand, is about taking action to reduce the probability of risks occurring and reduce their impact should they occur. This process can also involve developing contingency plans to minimize consequences if the risk becomes a reality.

Risk mitigation strategies

There’s no one-size-fits-all risk mitigation strategy. But we’ve covered six techniques you can use to mitigate risk: risk acceptance, risk avoidance, risk limitation (reduction), risk transfer, risk sharing, and risk buffering

#1. Risk acceptance

When you choose to accept the risk, it signifies that you’re aware of and acknowledge the risk. You accept its potential consequences and won’t be taking any further action to mitigate or eliminate it — at least for a certain period of time. 

This risk mitigation strategy is passive and has no effect. But it also doesn’t engage any resources, leaving you room to focus on threats that require other approaches.

When does using risk acceptance make sense? 

When the risk is very unlikely to happen, or it’s so trivial that it isn’t worth the effort to try to mitigate it (it meets your risk tolerance level). Another possible situation would be when the expense of the risk mitigation would exceed the cost of the potential risk consequences. 

For example, your project is to build a new product. Based on thorough research and analysis, it would help people all over the world travel more conveniently and safely. However, despite the hard data and well-received prototype, there’s a risk that the product could fail. Yet, you’re willing to accept the risk and decide to develop and bring the product to the market anyway.

#2. Risk avoidance

The risk avoidance strategy is the opposite of risk acceptance. With this strategy, you’re aware of the risk and want to avoid its consequences. 

Risk avoidance works best in situations where the positive outcomes of an action or decision are far outweighed by the negative impact of the risk. For example, deciding not to use unproven hype technology when developing a new product may be more reasonable (and beneficial) than risking gaining potential benefits from using it.

For that reason, risk avoidance is a more conservative approach. It’s also most costly as it entails a conscious sacrifice of potential benefits to eliminate danger. But on the other hand, it helps you conserve finances and resources and improve operational efficiency.

#3. Risk limitation (reduction)

The risk limitation (or reduction) strategy is arguably the most common approach organizations use.

It combines acceptance and avoidance strategies. But unlike risk acceptance, the risk limitation strategy is about taking action to limit a vulnerability toward a risk. You recognize and accept risk but decide not to avoid it because it’s critical to your project’s success. At the same time, you seek solutions to reduce the likelihood and impact of that risk.

For example, to mitigate the risk of resource burnout in a long-term project, your organization might implement wellness programs and co-sponsor gym memberships. Such an approach recognizes that burnout may occur but helps lessen its consequences and maybe even the likelihood of it occurring.

This strategy works well when you believe the benefits of implementing certain solutions outweigh the risks.

#4. Risk transfer   

The risk transfer strategy is about transferring the responsibility of mitigating some risks to someone else (third party). You’re basically “selling” a risk to someone else to bear its consequences.

This strategy can prove especially helpful when the risks associated with certain actions aren’t within the core competencies of your team or company. For example, when you outsource payroll services, the third-party calculating and processing the payments is also responsible for mitigating and handling respective financial risks.

The downside of the risk transfer strategy is that it can inspire decision-makers to make additional risky decisions. Knowing that they can willingly shift the risk associated with their actions to somebody else can entice them to take more significant risks than they otherwise would take if they were the ones to face the consequences.

#5. Risk sharing

In the case of risk sharing, not one but several parties share the risk, including internal and external stakeholders. Should the risk occur, the risk gains and losses are distributed among individual parties on specific predetermined bases so that they won’t rest on the shoulders of an individual party. 

In this regard, risk sharing is a derivative of the risk limitation approach since you’ll bear only a limited (reduced) amount of the gains and losses.

However, because this strategy involves multiple people, it’s essential to establish a good understanding of the risks and responsibilities among the people involved. Otherwise, when the risk occurs, instead of focusing on mitigating the risk consequences (or sharing rewards), you’ll be handling disputes.

 A typical example of the risk sharing approach is a joint venture where the venture (business or project) partners agree to share any possible losses from such an entity.

#6. Risk buffering

When buffering the risk, you add extra resources (human, time, budget) to mitigate the impact of a risk. The goal is to ensure your project (or another initiative) stays within the intended scope.

For example, there might be a risk that during open beta tests of your new digital product, the servers might fail to handle a high volume of user requests. In line with the risk buffering approach, you could temporarily employ additional servers to reduce the risk of servers crashing.

Steps for designing and implementing a risk mitigation strategy:

Your risk mitigation strategy must be actionable and practical. So that you and other stakeholders know how to mitigate the risk should it occur. No single strategy will work equally well for every risk and project, but the following five key steps will help you build a successful risk mitigation strategy.

#1. Identify the risks

Risk identification is the very first step when thinking about mitigating potential losses.

To succeed with this step, you’ll need to collect feedback from a wide range of stakeholders, examine historical project data, and understand the domain related to your project. Talking to your stakeholders, including your team members, will also help you look at your project from different perspectives. 

You may also want to create documentation for each uncertainty you identify. You will later expand your documentation with the respective risk mitigation strategy.

#2. Assess and prioritize the risks

This is a quantitative step because you’ll assign real scores to the risks you identified in the previous step.

Based on your risk assessment results, you will determine each risk’s likelihood (probability) and impact (consequences). And then map those risks on the risk matrix. The more probable and impactful the risk, the higher the risk score. Consequently, they should get a higher priority.

An example of the risk assessment matrix available in the BigPicture app. Risks located in the red and orange quadrants are the most critical since they are most likely to happen and most heavily impact your project.

#3. Plan a mitigation strategy for each risk

The risk matrix will show you that each risk is not equally impactful or likely to happen. Therefore, they will require different mitigation approaches. 

Based on the prioritization, you’ll need to decide whether each risk will be accepted, managed, transferred, or mitigated. You might also decide to blend the two strategies together to develop more custom approaches for your unique risks.

Apart from the risk priority, there are other factors you might also want to consider. Among others, those will be the risk capacity of your organization or team; resources currently available; and the potential benefits of mitigating the risk.

#4. Monitor and review risk strategies

Risks and their respective risk scores can change over time, depending on many different factors. For example, the latest regulatory and compliance laws. That’s why you’ll be continuously monitoring and reviewing your project risks. And, as a result, modify their respective mitigation strategies (whenever applicable).

Also, don’t forget to include any adjustments you make in your risk mitigation plan/document. This will help you ensure that the entire team and organization is aware of the changes so that they can carry out the mitigation process correctly.

#5. Report results

Risk mitigation is not a one-time activity. Depending on your project’s duration, risk assessment and strategizing the risks might take a while. That’s why you’ll constantly revise and update your risks and the effectiveness of your mitigation efforts. 

You’ll be communicating those revisions and updates to your upper leadership regularly. You’ll need their support to make risk mitigation more effective.

Risk mitigation strategies: Conclusion

Risk mitigation aims to lessen the probability of risks occurring and their consequences in case they manifest. Respective risk mitigation strategies, on the other hand, help you achieve that goal. They offer a variety of ways you can approach individual risks to make risk mitigation feasible and effective.

But selecting the right strategy is only one part of the entire risk mitigation process. You’ll also need to define and assess the project risks to choose the most suitable strategy (or a mix of a few). And then, you’ll be regularly monitoring and evaluating the risks and the strategies to mitigate them. 

Risk assessment is a marathon-like process that involves everyone on the team and organization. So you’ll be co-operating and reporting a lot with your stakeholders to ensure all the risks are well-assessed, revised, and understood. 

The BigPicture app can help you assess and visualize all your project risks, as well as issues at risk, on a customizable risk matrix. It’ll let you track and visually communicate risk changes to all the people involved in your project.