| John Spacey, November 27, 2015 updated on March 19, 2021
Risk reduction, or risk mitigation, is any strategy that reduces the impact or probability of a risk, potentially to zero. The following are a few examples:
1. Health And SafetyRequiring workers on a construction site to use safety equipment.
2. Exchange RatesA European car manufacturer reduces exchange rate exposure to the Japanese Yen by paying Japanese part suppliers with yen from their sales in Japan.
3. Customer ServiceA hotel reduces the risk of bad customer reviews by empowering all staff to handle customer complaints on the spot. For example, staff are able to upgrade a customer's room upon receiving a reasonable complaint.
4. QualityA car manufacturer reduces the risk of expensive and damaging model recalls with more rigorous quality assurance processes.
5. Dispute RiskA construction company reduces the risk of disputes by sending representatives to neighbors of a site to explain the schedule and what will be done to keep noise and impact to a minimum.
6. Weather RiskA solar power company reduces weather risk by scheduling critical construction tasks during the months with the best weather in a particular region.
7. Financial RiskAn infrastructure company reduces interest rate risk and refinancing risk by selling long term bonds when rates are low.
8. Project ManagementA project manager reduces project risk by breaking a project into small regular deliveries of weeks in duration.
|Also Known As||Risk Mitigation|
|Definition||An action that reduces the impact or probability of a risk.|
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