RISK MITIGATION | BFM MODULE B: RISK MANAGEMENT
In this post, we will explain risk mitigation, its aim & how its done as given in the BFM Syllabus to crack the 2023 exams.
As you must already know that the exams of CERTIFIED ASSOCIATES OF INDIAN INSTITUTE OF BANKERS 2023 are going to be held in June 2023, so it is better to be well prepared on day to day basis. We also know that these are considered to be the most difficult papers of IIBF. So, bankers need to cover the syllabus of CAIIB subjects be it:
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We will talk more about the latest video classes of CAIIB – ABM, BFM, ABFM, BRBL, Rural Banking, HRM, IT & DB, Risk Management, Central Banking and study materials prepared as per the prescribed syllabus later after discussing the current topic i.e. Risk Mitigation.
Risk mitigation is a strategy to prepare for and mitigate the effects of threats that a business faces. Comparable to risk reduction, risk mitigation takes steps to reduce the negative impacts of threats and disasters on business continuity. Threats that could endanger a business include cyber-attacks, weather events, and other causes of physical or virtual damage. Risk mitigation is one element of risk management and its implementation will vary from organization to organization. But its presence is in every organization these days.
What is the main objective of risk mitigation?
Risk mitigation is the one way of disaster planning and a way to mitigate negative impacts.
The principle of risk mitigation is to prepare the business for all potential risks & a proper risk mitigation plan will consider the impact of each risk and prioritize planning around that impact. Risk mitigation focuses on the inevitability of some disasters and is used in situations where the threat cannot be completely avoided. Rather than planning to avoid risk, mitigation deals with the consequences of a disaster and the steps that can be taken before an event occurs so as to reduce adverse and potentially long-term effects.
In an ideal situation, an organization would be prepared for all risks and threats and avoid them completely. However, a risk mitigation plan can help an organization prepare for the worst, recognize that some level of damage will occur and have systems in place to deal with it.
So, what exactly is included in a risk mitigation plan?
There are several steps involved in creating a risk mitigation plan that are fairly standard for most organizations. Recognizing recurring risks, prioritizing risk mitigation, and following a set plan are critical aspects of maintaining a thorough risk mitigation strategy.
The process of designing a risk mitigation plan has 5 general steps:
- Identify all possible events that pose a risk. A risk mitigation strategy considers not only the priorities and protection of mission-critical data of each organization, but any risks that might arise due to the nature of the industry or geographic location. A risk mitigation strategy must also consider the organization’s employees and their needs.
- Conduct a risk assessment that includes quantifying the level of risk for identified events. Risk assessment includes measures, processes and controls to reduce the impact of the risk.
- Prioritize risks, which includes ranking quantified risks in terms of severity. One aspect of risk mitigation is prioritization—accepting a certain amount of risk in one part of the organization in order to better protect another. By establishing an acceptable level of risk for different areas, an organization can better prepare the resources needed for BC while deferring fewer critical business functions.
- Monitor risks, which includes monitoring risks as they change in severity or relevance to the organization. It is important to have strong metrics to track risks as they evolve and to monitor the plan’s ability to meet compliance requirements.
- Implement and monitor progress, which includes reassessing the plan’s effectiveness in identifying risks and making improvements as needed. When planning for business continuity, testing the plan is essential. Risk mitigation is no different. Once the plan is in place, regular testing and analysis should take place to ensure the plan is up-to-date and working well. The risks facing data centers are constantly evolving, so risk mitigation plans should reflect any changes in risks or shifting priorities.
Are there different risk mitigation strategies?
There are several types of risk mitigation strategies. These strategies are often used in combination with each other, and one may be more advantageous than the other, depending on the company’s risk environment. All are part of a wider risk management practice.
- Risk aversion is used when the consequences are considered too high to justify the cost of mitigating the problem.
For example: an organization may choose not to carry out certain business activities or practices to avoid any threat they may pose. Risk avoidance is a common business strategy and can range from something as simple as limiting investment to something as severe as not building offices in potential war zones.
- Risk acceptance is the acceptance of a risk for a given period of time in order to prioritize efforts to mitigate other risks.
- Risk transfer allocates risks between different parties in accordance with their ability to protect against or mitigate the risk.
One example might be a defective product made from a certain amount of third-party material. Because of this, the product manufacturer may transfer responsibility for a certain fraction of the risk.
- Risk monitoring is the act of monitoring projects and related risks in terms of changes in the impact of related risks.
Risk can affect any combination of performance, cost and scheduling; therefore, different strategies should be used to address risks based on how these factors influence.
For example: it may be more important for a company to perform well than to save money in a certain project scenario. A company would likely use a risk-taking strategy and temporarily prioritize risks that affect the performance more than costs.
Which Practices are considered the Best for Risk Mitigation?
Below are some best practices for risk mitigation that information security professionals should follow:
- Making sure that all the stakeholders are involved in every step. Stakeholders can be employees, managers, unions, shareholders or clients. All perspectives are important to developing a comprehensive, holistic risk mitigation strategy.
- Creating a strong risk management culture. This means communicating values, attitudes and beliefs about risk and compliance from the top down. Risk awareness is important for every employee, but the likelihood of a strong culture is greatly increased when leadership sets the tone.
- Communicate risks as they arise. Risk awareness needs to be strong across the organization, so it’s important to facilitate the communication of new high-impact risks to keep everyone in the loop.
- Ensure that the risk management policy is clear so that employees can follow it. Roles and responsibilities should be clearly defined and each defined risk needs a clear procedure to deal with it.
- Continuously monitor possible risks. Risk monitoring procedures should also be clearly defined and implemented to continuously improve the risk mitigation plan.
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