All businesses from small to medium are exposed to risks all the time. These risks can directly affect day-to-day operations and decrease revenue or increase expenses. Such an impact may be serious enough for your business. Sound risk management with risk mitigation strategies will help in various scenarios.

What Is Risk Management?

Risk management starts by recognizing possible threats and then implements processes to negate or minimize them.

But for that you happen, it is essential that you identify the risk and mitigation processes first. Then select from the various types of risk mitigation strategies.

Let us take situation based risks and risk mitigation strategies for each in pointers:

1. Risks Posed by Customers

Scenario: The business is highly-dependent on a small number of major customers. There is one customer who generates 55 perfect of the total revenue or a group of five customers who collectively generate the same amount. What kind of risk mitigation plan should be implemented if there are clientele that takes up your time but are less profitable?

Risk: If your business relies on a small number of major customers, cash flow and profit may get affected in the short term if one stops yielding revenue.

Risk Mitigation Strategy

 There are many strategies that you can choose to follow like:

• Lock in key customers through long-term service contracts. You can visit them regularly and ask their views about the business’s products and services.
• Take a different route and spread the risk by developing smaller, existing customers to become large customers.
• Plan your risk mitigation strategy and seek new and profitable customers.
• You can opt for lower-cost ways of servicing the less profitable customers.

2. Risks Posed by Suppliers

Scenario: The business is highly dependent on a small number of major suppliers. You have one supplier that provides 30 percent or more of the total product requirements. Or there is a supplier whose failure to supply can stop your business.

Risk: If your business depends on a small number of suppliers, production, profits, and cash flow could be affected if one of them fails. You will also require a comprehensive risk mitigation plan if one of them stops dealing with you.

Risk Mitigation Strategy

You can opt for any of these risk mitigation strategies:

• Lock in key suppliers through long-term service contracts.
• You can seek alternative suppliers capable of supplying similar items.

3. Risk Posed by Staff 

Scenario: Your employees eye it as a short-term employment option. They believe that it is a good learning palace for a while and for a start to the career.

Risk: If your business is seen as a short-term employment opportunity, high staff turnover could result in disruption to the business. These expenses of finding and training new staff that leave early will not be profitable to your company as well.

Scenario: There are employees in the business who are critical to its success.

Risk: If an employee is critical to your company’s success, then sales and profits may suffer if the employee sets up business in competition.

Risk Mitigation Strategy

• Implement selections procedures that increase the probability of finding the right staff for the business as your risk mitigation plan.
• Put in place confidentiality agreements to be signed by all staff.
• Allocate several persons to fulfill key tasks and provide backup in the event of illness or sudden departure.

4. Risk Due to Threatened Goodwill and Reputation

Scenario: All businesses, including yours, are exposed to the threat to its reputation and goodwill.

Risk: In an event where there is a large-scale product recall, fraud, or similar event, it will lead to a lot of bad publicity. It will cause distress to your business, including putting it to trouble and expense of reworking. And cause longer-term damage to your company’s reputation.

Risk Mitigation Strategy

The risk mitigation plan should include:

• Incorporate robust review processes and quality assurance check systems. This way, you can avoid a situation that may damage your company’s reputation.
• Invest in research and development and keep up to date with technological advances.
• Initiate compulsory training and development programs for all staff.

5. Risks Posed by IT

Scenario: Your organization relies heavily on information technology. Due to the server being slow or down, your office work is getting hampered.

Risk: If your company is IT reliant, your business might not be able to operate without it. Many other risks are linked with IT:

• IT service delivery should be impeccable so that all the software applications work.
• IT solutions are a part of the daily work process enabling it to run efficiently.

Risk Mitigation Strategy

These should be a part of your risk mitigation plan:

• Protect laptops and desktops
• Ensure protection for server
• Perform backups and store the backups offsite
• Use the internet safely
• Secure the line of business applications
• Have an uninterrupted power supply unit

6. Risks Posed by Economy

Scenario:  Your organization is exposed to risks from changing tastes and trends or the impacts of an economic downturn. A downturn may impact your customer base.

Risk: With changing trends or an economic downturn, the viability of the business is at stake.

Risk Mitigation Strategy

• Research new consumer trends and tastes so that the business can respond to change.

• Test the market to see what products and services consumers prefer currently. Doing so provides an understanding of changing consumer sentiment during changes to the economic cycle.
• Promote products and services that sell better during an economic downturn.
• Promote stock or services that sell well and are profitable.
• Use financial statements to benchmark financial and operational performance against industry averages.

At TRC Corporate Consulting, we excel in partnership models and ensure that our risk mitigation services prove as a benefactor to the firms. We undertake all necessary directives and ensure that our experts formulate the best types of risk mitigation strategy as per the situation.

Our motive, at TRC, is to provide a safe and secure environment enabling your organization to fulfill your dreams and attain objectives. Get in touch with us to understand our risk mitigation services. If you face any trouble, we will be happy to help you!