Risk mitigation is defined as taking steps to reduce the adverse effects of any identified risk. There are four types of risk mitigation strategies: Risk Acceptance: It doesn’t reduce the effects of the negative when it happens; it’s a strategy. This is a common strategy when the cost of the risk mitigation, like avoidance or limitation, is greater than the cost of the risk itself. You don’t want to spend money avoiding risks that don’t have a high possibility of occurring. Risk Avoidance: It’s the opposite of risk acceptance. It’s an action that avoids exposure to the risk. Risk Limitation: The most common risk management strategy in use today. This strategy limits your company’s exposure by taking some action(s). It uses a little risk acceptance and a little risk avoidance to limit your overall exposure to the risk. Risk Transference: This is literally handing risk off to a third party, like an insurance company. If you identify a risk that isn’t a core competency of your company, transfer it to a willing third party. So basically, by investing in insurance you’re transferring some of your risk to the insurance company. Remember, however, always be sure to keep your senior management team informed when it comes to insurance and using insurance to mitigate various risks for your organization. The adage, “Your mileage may vary”, made famous by the automobile industry, is very apropos here. There’s no one answer for every company everywhere. Coverage requirements vary from state-to-state. All the vendors you do business with must have two standard insurance coverages in the U.S. The two standard insurance forms that are always required and should be in your initial due diligence checklist include: Worker’s Compensation: Provides wages and medical benefits to employees who are injured in the course of employment. The employee gives up the right to sue their employer for negligence. Every state has a minimum coverage limit, and the vendor will be required to meet the specific coverage for the state in which they have employees conducting business. Liability Insurance: Also called third party insurance, it’s a fundamental part of your risk management system. It protects your organization from the risks of liabilities from lawsuits and protects the insured in the event they’re sued for claims that fall within the coverage parameters of the insurance policy. Damage caused intentionally and contractual liability aren’t covered under liability insurance policies as it provides coverage for legal fees, which can be quite expensive. This is particularly useful in “nuisance” lawsuits. Beyond those two forms of insurance coverage, it depends on your industry, your organization and on the specific function or activity the vendor will be performing for your organization. So, your requirements for insurance coverage “may vary”. General Liability: Every company you do business with All companies who have workers on your property Worker’s Compensation Any company that has workers on your property Any company you do business with. Umbrella: Any company that poses a material risk to your organization’s safety and soundness Any company whose failure might cause your organization to fail