Risk Mitigation

The terms risk mitigation and risk reduction denote the implementation of measures aimed at reducing the impacts of hazards.

Risk mitigation measures may include determining an entity’s ability to accept and absorb risk (risk retention) or to transfer risk to another entity such as an insurance company (risk transfer). They may also include risk reduction – or cutting down on high-risk activities to lower risk to a level which an entity can absorb. Risk avoidance is another form of risk mitigation which involves refraining from actions which create risk.

In business and finance, some of the most common forms of risk include investment risk (the risk of capital loss), legal risk (the risk of legal repercussions resulting from an action), or reputation risk (the risk of reputation damage resulting from an action).