Mitigation is defined as the action of reducing the severity or seriousness of something. Risk is measured, mitigated, and monitored. When it comes to banking, risk is mitigated in several ways, including using controls and clear communication. Here are some methods financial institutions use for mitigating risk.
Cultivate a Risk Management Culture: In mitigation, it is important to make all your employees aware of your policies on how to deal with risks. Not only should they be made aware of policies during the hiring process, but they should also be reminded of these policies during their employment.
To this end, it is best to hold regular training sessions. If the financial institution introduces new technology, training may be necessary to ensure that employees know how to use it without creating more risk. Outside vendors from companies providing the technology may be brought in for these purposes.
Prevent Risks: Risks for financial institutions include third-party risk, cyber risk, reputational risk, operational risk, strategic risk, and compliance risk. It’s crucial to prevent risk whenever possible. Having the right procedures in place can make the difference between security and vulnerability.
Make Sure Events Caused by Risks are Dealt with Quickly: In case an event that substantiates a risk occurs, make sure it can be dealt with quickly. Establish an effective protocol for employees to report and deal with risks. All employees need to be trained to take specified actions as soon as this event occurs and notify relevant departments immediately.
Financial institutions are vulnerable to financial risks, legal liabilities, IT security threats and data loss. With effective risk management planning, employees are aware that events that substantiate risks can occur. They know what to do to mitigate the risk without delay. They need to be alert to these risks so they notice them as soon as they arise and take the proper actions to reduce or eliminate the risk.
Risks are all too present in the banking industry. A bank may not be able to avoid all risk, but what they can do is reduce the severity and seriousness of the risks to help protect both the institution and its employees.