Risk mitigation is any action that can be taken to reduce:
• the likelihood of a risk occurring
• the consequences to the contracting party managing the risk, if it does occur.
There are two types of mitigation options:
(i) early options, designed to limit the likelihood of the risk eventuating or to reduce its consequences for the project if it does materialise
(ii) later options, generally involving cooperation between the parties to minimise direct financial impacts of a materialised risk. In many cases this may involve use of a material adverse effect regime.
Risk mitigation is an attempt to reduce the relevant party's exposure to the risk. Mitigation practices vary depending on the risks being considered and whether the party concerned is a private or public one. The way a project is scoped can also act as a mitigant. For instance, transferring control of certain raw water storage facilities to the private party in a water treatment project can lessen the interface risk between the private and government parties.