Question

Assume that you are an Enterprise Risk Manager in your company, what sort of risk mitigation program would you implement? This question also requires some research.

Answer 1

The Risk mitigation is a process where the business objectives are protected from the risk affects. The Risk mitigation program implementation requires the development of options to handle and reduce the effect of risk on business. This includes:

1) Absorption or Acceptance of risk: The assessment of the risk absorption and taking capacity of the business and controlling the rest of the risk. Like accepting higher interest rates on the debts.

2) Avoiding ability of the risk: The business should avoid the risk as much as possible so that the resources and labor expense reduced. Risk of using scarce materials could be replaced through use of generally available materials.

3) Controlling : The business should minimize the risk occurrence through taking actions against risk likelihood and origins. Having pre-stocking of the scarce raw-material or hiring skilled labor on permanent basis.

4) Watchdog on risk: The company keep an eye on the risk and take appropriate action when the situation demands to tackle the risk. Example, keep the selling price at lower rate when the raw-material is cheap and raise the selling price on raw-materials become expensive.

5) Transfer of risk: The risk of the business could be transferred to the other associates stockholders like suppliers (through delaying payment), to debtors (through reducing credit period), shareholders (through not declaring dividends), etc.