4 Effective Risk Mitigation Strategies

The concept of minimizing risks
A man engaged in tightrope walking

When a team embarks on a new energy project, it has to deal with certain risks that can hamper the achievement of project goals. Mitigating these risks to upstream energy projects is key to ensuring project delivery.

Risk mitigation, however, is a complex job that often requires firms to seek external help. This is why many energy leaders who are in need of PLM system management will consult firms that know what steps to take to deliver value.

Before we look into some of the risk mitigation strategies, let’s discuss what risk mitigation is in detail.

What is Risk Mitigation?

Risk mitigation is the process of planning and developing techniques to reduce risks or threats to the objectives of a project. For risk mitigation, a project team first identifies potential risks and then monitors and evaluates them to study their consequences for a project, such as new product development.

They then take actions to deal with the effects and issues to eliminate the risks. All these practices are part of risk mitigation.

Here are some effective risk mitigation strategies to use:

Risk Mitigation Strategies

1. Risk Avoidance

One of the most effective ways to mitigate risk is to completely avoid the circumstances that lead to an identified risk. This means you step away from the activities that result in the unwanted negative consequence to avoid its occurrence.

One approach is to devise procedures and policies that help the organisation to anticipate and avoid high-risk situations.

Another great strategy is to adopt the practice of screening or testing products that might have a hidden defect that can cause significantly high field failures. While screening is not 100% reliable, it significantly reduces the risk of field failures.

If a less reliable material in the product design is subject to unacceptable wear, switching to more robust raw materials should help avoid unwanted failures. Prior to the start of the project, high-risk areas of a process or new products can be tracked implementing engineering design reviews in the product lifecycle.

2. Risk Reduction

Another risk mitigation strategy is to reduce or control the risk through risk prioritizations tools such as Fault Tree Analysis (FTA), hazard analysis, and Failure Mode Effects Analysis (FMEA). The underlying goal of risk reduction is to reduce the severity of the unwanted consequence or its probability of occurrence.

Fault tree analysis (FTA) is a graphical tool that uses a top down approach to identify the causes contributing to a projected risk or failure, while Failure Mode Effects Analysis (FMEA) is a step-by-step approach to identify all the potential risks or failures in a project. Hazard analysis is the simple process of defining hazards that may occur in the system or its environment, analysing their possible causes, and documenting the consequences.

If you can’t possibly reduce the severity or occurrence of an unwanted risk, consider establishing controls. Implementing controls often helps track the root causes of potential unwanted consequences or events during the process. Eliminating those root causes as soon as you detect them is a great way to reduce or completely eliminate the risk.

It also makes sense to implement controls on management decision-making. This should help improve the decision-makers’ ability to identify design flaws and predict accurate field failure rate, both of which are critical to improving decisions concerning risk mitigation.

In other cases, it might be more useful to diversify to reduce or control risk. Diversification involves exploring the different options for product mixes, markets, supply chains, technologies, operations, etc. Choosing low-risk opportunities should help limit the risks to an acceptable or manageable level.

3. Risk Sharing

As the name suggests, this strategy involves sharing the responsibility for risk activities with another party. One great risk sharing approach is to sign a joint venture agreement. This way, you benefit from the knowledge and expertise of the other company that can help to effectively mitigate risks.

Projects that run on an international scale are often vulnerable to legal, political, economic, and other types of risk. The partnering company can also help reduce risks specific to international projects.

4. Risk Transfer

Simply put, risk transfer is a risk mitigation strategy that involves handing over the risk to a third party instead of dealing with it on your own. The most common way of doing this is to outsource a business function to an independent or third-party.

The most intimidating of all business functions is risk mitigation, particularly those associated with legal issues. Sensible energy firms decide to outsource this very function for their megaprojects to reliable expert witness consulting firms.

You may have solid technical understanding of your energy project with a talented project team, but tight headlines and harsh conditions often create a heightened environment. In such a setting, one can easily overlook the essential elements.

Furthermore, in many cases, adhering to project management principles is insufficient. You may need to seek it consulting service from companies such as NexusTek to assist you with your technical problems. Their in-depth understanding of your industry and dealings with common issues faced by businesses can help your company tackle problems that your team cannot solve on their own. For example, some technical issues may be too complex for the IT department to handle. In such cases, a company cannot avoid hiring experts to restore normalcy and prevent a similar crisis from occurring again in the future.

For instance, EPEUS Consulting uses its risk insights to provide perfect foresight for your megaprojects. Whether you’re trying to understand what’s possible in your current project or are looking to introduce changes to your plan, EPEUS Consulting ensures proactive risk mitigation to secure your reputation.

Final Word

No project is free of risks, and effective risk mitigation is the key to project success. How you wish to deal with risks depends on your industry and project goals.

When enormous risks are involved, you might need to proceed to court litigation, which itself is a risk. This is where expert witness consulting firms can be of great help.

EPEUS Consulting can help you realize your goals, avoid pitfalls, and effectively mitigate risks for your upstream energy projects.

For expert advice on risk mitigation, dial +44 193 282 4590 now or email us at info@epeusconsulting.com.

Author Bio:-

Claudette leads the marketing initiatives for Epeus Consulting and
regularly produce market insights papers for Upstream Oil & Gas and Renewable sectors. She’s an experienced business, reporting, and market analyst, with several years’ experience in Upstream Oil & Gas and Financial Services.