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ROI of Mitigation Action

Risk management has traditionally used qualitative estimates of the probability of a risk occurring and the cost of its consequences, which for the most part was not even present in the reports.

Decisions on whether to take specific mitigation actions were not based on a defined and thorough understanding of the risk's impact and mitigation actions. It was more the result of experience and following the beaten track.

The concept of ROI on Mitigation Action is here to stay and rightfully so!

But times have changed. Events have changed and so has technology. In recent years the concept of ROI on Mitigation Action has emerged strongly and justifiably, it is here to stay!

When a company is able to distinguish the fine line between the Risks it needs to mitigate and those it will accept, using across all its business dimensions, a single understandable language (cost), then it is able to manage risk in the best possible way.

Quantifying all risks is a difficult task, but the more metrics and models are followed rather than qualitative data are analysed, the more the accuracy of estimates increases.

Determining the exact cost of Actions and Risks and determining the ROI of each Mitigation Action can be very complicated.

The situation is of course further complicated by the fact that in real life there are several risks that are running in parallel and any mitigation costs. Also the relationship between Mitigation Action and Risk is almost never one to one. One Action can mitigate more than one Risks in a different way and one Risk can be mitigated by several parallel Mitigation Actions but completed at a different time!

Determining the exact cost of Actions and Risks and determining the return on investment of each Mitigation Action can certainly become very complicated.

Effective tools such as the E-One RIBIA ERM as well as good economic models can more clearly highlight the true value and costs associated with Risk Mitigation and result in a clear ROI on Mitigation Action figure.

This is, after all, the future.


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