Difference between Managing Risk and Mitigating Risk, and between Mitigating Risk and other Risk Responses (Source: ChatGPT)
The difference between managing and mitigating risk lies in their scope and approach:
🔹 Managing Risk
Definition: The overall process of identifying, assessing, prioritizing, and responding to risks.
Goal: To control the impact of risk on objectives—whether through avoidance, acceptance, transfer, or mitigation.
Broad scope: Includes not only mitigation, but also:
- Risk identification
- Risk assessment
- Risk communication
- Risk monitoring and review
Example:
A company develops a full risk management plan that lists potential cybersecurity threats, evaluates their likelihood, assigns responsibilities, and decides on a mix of mitigation and insurance strategies.
🔹 Mitigating Risk
Definition: A specific action within risk management focused on reducing the likelihood or impact of a risk.
Goal: To lessen the severity or probability of a specific risk occurring.
Narrow scope: It’s one of several responses under risk management.
Example:
Installing firewalls and regularly updating software to reduce the chance of a cyberattack is a risk mitigation measure.
🔹 Risk Response – Definition & Types
Risk response refers to the strategic actions taken to address identified risks. It's a core part of risk management and involves deciding how to deal with each specific risk based on its likelihood and potential impact.
✅ Types of Risk Responses
1. Avoidance
Goal: Eliminate the risk entirely.
How: Change the plan or process so the risk no longer exists.
Example: Canceling an international project due to unstable political conditions.
2. Mitigation (Reduction)
Goal: Reduce the probability or impact of the risk.
How: Implement controls or safeguards.
Example: Installing antivirus software to reduce cyber risk.
3. Transfer
Goal: Shift the risk to a third party.
How: Use insurance, contracts, or outsourcing.
Example: Buying insurance to cover damage from natural disasters.
4. Acceptance
Goal: Acknowledge the risk and proceed.
How: No action taken besides monitoring.
Example: Choosing to accept a small potential loss because the cost of mitigation is too high.
5. Exploit (for positive risks/opportunities)
Goal: Ensure the opportunity happens.
How: Allocate more resources or increase efforts.
Example: Fast-tracking a feature that can boost market share.
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