Finding the Optimal Level of Risk Mitigation: Tips from the Hiking Trails

The Resilient Enterprise | The riskmethods Blog

Every person, and every business, has an optimal level of risk mitigation: the amount of protection that is appropriate to keep you safe, without going too far over or too far under the line. So what’s your optimal level? And how can a hiking trail help you find it?

What is an optimal level of risk mitigation?

At first glance, the phrase “finding the optimal level of risk mitigation” sounds pretty technical. But, if you think about it, you’ll realize it’s something that all of us do every single day. For example: Do you cross the street against the light, or do you wait for the signal? Crossing against the light is a risk, and your decision about whether or not to do it is probably based on several factors: Are you in a rush to get somewhere? Is it a massive road with multiple lanes, or a quiet side street? Are other people doing it? Depending on the answers to these questions, you’re likely to make different decisions. But either way, whatever your decision: By making it, you just identified what you think is the optimal level of risk mitigation for your specific scenario.

Let’s take another example. I’m a hiker and, as a hiker, I have to decide what level of preparation I need when I go out on the trails. For the highest possible level of risk mitigation, I could max out all the options. 3 days of water, in case I get stuck out there. An oxygen tank, in case I suddenly decide to ascend over 25k feet. A change of clothes, in case I accidentally fall into a river. A flare gun, in case I need to call attention to myself from a distance. A real gun, in case I get attacked by a bear. Well, you get the idea.


Example of risk assessment in hiking

But…do I really want to go to that level of risk mitigation? For one thing, it sounds pretty expensive. For another, I’m going to have to carry a lot of stuff. And most of all: Is it actually necessary? No matter what, I’m going to wear the right clothes and bring water. But if I’m an experienced hiker in reasonably good shape and I’m going out for a 3-hour excursion, I can probably skip the oxygen tank. In my scenario, maxing out all the options isn’t a reasonable decision. And here we are again! I just did it: I identified what I think is my optimal level of risk mitigation.

If you’re looking at your business, you should be asking yourself whether or not you’ve found the optimal level of risk mitigation. Are you doing nothing—going out on the trails in flip flops? Are you doing the absolute minimum—dressing and hydrating appropriately? Or are you maxing it out with all the oxygen tanks and flare guns you can find?

Optimal level of risk mitigation in practice

Here at riskmethods, we specialize in supply chain risk, and we’ve got strong opinions about what kind of protective gear your supply chain needs. For example, if you have two suppliers that work down the street from you, you simply don’t need a massive risk management program to help you manage them. This would be like bringing an oxygen tank for a stroll on the beach. However, if you’ve got a global supply chain with a number of key suppliers, you’re in the Himalayas. You better be sure you have at least the right clothes and some water—and you’re probably going to need a few more things than just those.

If you’re wondering whether your supply chain protective gear is good enough—and you should be!—check out our beginners guide to supply chain risk management. You’ll learn all about what protection you need to keep your supply chain safe, so you can make sure that you don’t end up hiking up a mountain in flip flops. (Seriously. Don’t do this!)

In the meantime, if you see me on the trails, say hi! And, dear reader, please: Make sure I’m not being chased by a bear.

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