Quick answer: Risk mitigation is what a firm actually does about the risks it has identified. After assessment, mitigation applies one of four responses — avoid, reduce, transfer, or accept — to bring each exposure within tolerance, so that risk-taking is deliberate and controlled rather than left to chance.

What is risk mitigation?

Risk mitigation is the action stage of the risk cycle, following identification and measurement. It puts decisions into effect, translating the findings of risk assessment into concrete steps that reduce exposure. It is where financial risk management becomes tangible.

What are the four mitigation strategies?

Firms can avoid a risk by not taking it, reduce it through controls and diversification, transfer it via hedging or insurance, or accept it when it falls within appetite. Most programs use a mix across their exposures.

How do hedging and insurance transfer risk?

Hedging with derivatives transfers market and commodity risk to a counterparty, while insurance transfers certain operational and hazard risks. For commodity exposure, see our natural gas hedging guide.

What about residual risk?

No mitigation removes all risk; what remains is residual risk, which must be measured, accepted consciously, and monitored against risk appetite. Mobius Risk Group's hedge strategy solutions help firms transfer and reduce commodity price risk effectively.

Frequently asked questions

What are the four risk mitigation strategies?

Avoid, reduce, transfer, and accept — chosen for each exposure based on its severity and the firm's risk appetite.

What is risk transfer?

Shifting a risk to another party, typically through hedging with derivatives or through insurance, so the firm no longer bears it directly.

What is residual risk?

The risk that remains after mitigation, which must be consciously accepted and monitored against the organization's risk appetite.