What is Risk Mitigation?
What is Risk Mitigation?
Risk mitigation is the process of implementing a strategy to minimize a risk’s impact or likihood. Every organization faces financial, security, and other operational risks that can interrupt business success. Risk mitigation focuses on proactively planning and developing options to protect business objectives in the event of adverse circumstances. Implementing strategies beforehand helps limit adverse effects and enables businesses to recover faster from challenging situations.
What risks do organizations face?
Risk is the likelihood and severity of an event occurring that disrupts operations or causes a loss. Risks can originate from external factors and internal organizational processes and should be prioritized based on the severity of their impact and the likelihood of their occurrence. Here are some common risk categories.
Compliance risks
Compliance risks are any potential issues that an organization could face due to failing to comply with regulatory frameworks and laws. The risk of non-compliance can vary based on the specific function of a regulatory framework, but can range from financial penalties and the cancellation of a certification to process disruptions and negative publicity.
Cybersecurity risks
Cybersecurity risks refer to any factor that can affect the confidentiality and security of your company's data or assets. These risks include bugs in code, inadvertent security events, or unauthorized access by outside parties to confidential information.
Environmental risks
Environmental risks refer to any changes in the climate or physical surroundings that negatively affect a company’s physical assets or disrupt the supply chain. An environmental risk can be anything from natural disaster events to resource depletion or anything that hinders your company’s ability to operate efficiently.
Market risks
Market risks are any sudden changes in broader economic stability, such as shifts in interest rates, fluctuations in market demand, or rapid market movements that introduce volatility to your business operations.
Operational risks
Operational risks are any situations that arise from the day-to-day functioning of your business. These can be related to your employees, your supply chain, or any other systems you rely on. For example, the chance that a piece of machinery fails in one of your factories is an operational risk.
Reputational risks
Reputational risks include factors that could damage your brand’s image. For example, if you are unable to keep customer data secure, it could affect your brand reputation. Similarly, if your company is involved in harmful business practices, this could pose a reputational risk.
How can organizations approach risk mitigation?
There are several ways that businesses can approach risks to mitigate them and reduce the likelihood of risks occurring. Here is a structured approach that organizations can follow for effective risk management.
Risk identification
Risk identification enables your business to pinpoint where risk is likely to occur, allowing you to develop effective strategies to manage that risk. Risk awareness and identification can include reviewing past incident data, conducting a strengths, weaknesses, opportunities, and threats (SWOT) analysis, and monitoring emerging market threats.
Risk analysis
Risk analysis is the process of assessing each identified risk and determining its level of intensity and overall threat. Identifying the highest-priority risks allows you to then address the most mission-critical risks first. Risk analysis uses both quantitative and qualitative methods to determine the severity of each scenario.
Risk mitigation planning
Risk mitigation planning involves developing action plans to mitigate each of the risks defined in earlier stages. Starting with the most severe risks, you can develop strategies that reduce the likelihood of that risk occurring, to decrease its severity if it does occur, and create contingency plans.
Risk solution implementation
Organizations implement risk mitigation tools, controls, strategies, or business changes that decrease the severity of the identified risks and neutralize them.
Risk tracking
Risk tracking refers to the process of monitoring how risks evolve and change over time. Risks are not fixed in their severity or likelihood of occurring, which is why risk monitoring and documenting any changes is important. If the severity of a risk increases or decreases, businesses can take appropriate action to protect their organization.
What are the types of risk mitigation?
There are four primary types of risk mitigation strategies that organizations can employ to enhance business continuity.
Risk mitigation
Risk mitigation is the process of minimizing the likelihood of a risk’s occurrence or the severity of its impact. For example, you could conduct regular safety checks on equipment in line with standard practices or encrypt customer data to minimize the impact of an inadvertent disclosure.
Risk avoidance
A risk avoidance strategy is the employment of actions that remove potential risks entirely. For example, your company might determine that operating out of a specific location poses too much risk. The risk avoidance strategy would be to relocate to a different area that does not pose the same level of risk. Risk avoidance aims to remove the risk entirely by removing or replacing the specific at-risk element.
Risk acceptance
A risk acceptance strategy is the process of accepting the consequences of a risk instead of taking any steps to mitigate it. For example, it might be more cost-effective to accept the cost of a risk rather than eradicating it, making it a better option to simply accept the risk and focus on other priorities. This strategy only works when the predicted impact of a risk is low.
Risk transfer
Risk transfer is the process of creating contractual agreements between your business and third parties that take accountability if an incident were to occur. For example, organizations may partner with third party equipment maintenance specialists who are typically liable in the event of breakage during maintenance.
What is the difference between risk mitigation and risk management?
Risk management is a comprehensive process that involves identifying risks, designing strategies to mitigate them, implementing strategies, and continually monitoring risks across the organization.
Risk mitigation is a core component of the risk management process, involving the application of active strategies to reduce the likelihood of a risk occurring.
A risk management plan has a much broader scope than any risk mitigation strategies and applies to all risks in your organization. Risk mitigation, on the other hand, may be one strategy that you employ to manage a certain risk.
What is cloud risk mitigation?
Cloud risk mitigation is the mitigation of risks in cloud-specific environments. These risks can occur during migration or during typical operations.
Before and during migration, cloud risk mitigation anticipates and addresses risks to support faster cloud transformation. For example, risk mitigation strategies in cloud migration help to ensure limited to no downtime of operations. During cloud operations, cloud-specific risks, such as cloud access permissions, must be addressed and remediated.
Consider the following cloud risk mitigation best practices:
Define your cloud risk management framework
Businesses can review their overall cloud risk management strategy for migration to clearly establish intended outcomes and implementation timelines. By assigning clear ownership and communications strategies within your cloud adoption, you can keep stakeholders informed throughout the risk mitigation process.
Establishing a clear and documented cloud governance framework, such as the best practices defined in the AWS Well-Architected, informs controls and architectures to manage cloud risk.
Categorize cloud risks
Develop an ongoing risk identification process that actively identifies both technical and human-centered risks in your cloud adoption and operations strategy. Use it to determine the severity of risks, then identify which potential risks should be your priority. Prioritizing cloud risk mitigation strategies with a higher impact enhances your risk tolerance. For example, many organizations choose instance replication within availability zones to help ensure continuity of services in the event of an outage.
You can use a risk evaluation matrix that includes impact risk assessments to streamline this process. The evaluation matrix has severity on one axis and likelihood on the other, with the potential impact in each space on the grid. Since each organization’s risk appetite is different and can change, the potential impact scoring can also change.
Track and monitor risks
Monitor all your cloud-related risks by using a structured tracking system. You can create your own document or application or choose an existing risk tracking tool. Some tools will even integrate directly into your cloud environment. For example, AWS Security Hub tracks security risks across your AWS cloud environment.
By documenting the mitigation actions you have taken, you can assess how effective they were in reducing the risk impact.
How can AWS support your cloud risk mitigation?
AWS provides a range of services and guidance to help customers implement risk mitigation strategies and controls across their cloud environment. For example,
- AWS Audit Manager allows you to continually audit your AWS usage, with evidence collection, to simplify risk and compliance assessment.
- AWS CloudTrail is a service that enables governance, compliance, operational auditing, and auditing of your AWS account. Track user activity and API usage on AWS and in hybrid and multicloud environments.
- AWS Config allows you to continually assess, monitor, and record resource configuration changes to simplify change management and help ensure accurate auditing.
- Amazon CloudWatch allows you to monitor and understand your entire technology stack, from applications to infrastructure so you can optimize your workloads for performance, availability, and security, helping to mitigate operational risks.
- AWS Cloud Operations provides a model and tools for a more secure and efficient way to operate in the cloud. Operating in the cloud allows IT teams to focus on business outcomes, optimizing IT processes while accelerating software development and innovation.
Get started with risk mitigation on AWS by creating a free account today.