How can you reduce the risk for your customer? Risk can include physical risk (risk of using the product), financial risk (cost and value of the offering), selection risk (finding the right product), delay risk (delivery in timely manner), functional risk (product does not perform as predicted or expected), psychological risk (e.g., status, peer-pressure). For example: by offering free shipping and returns, e-commerce companies reduce customers (financial) risks associate with orders.

When and how to apply Risk Reduction:

Reducing risk is the process of preparing for and mitigating the negative effects of potential disasters.

Although the principle of risk mitigation is to prepare a business for all potential risks, an effective risk mitigation plan will evaluate the impact of each risk and prioritize planning based on its impact. Risk mitigation focuses on the inevitability of certain disasters and is employed when a threat cannot be entirely avoided. In contrast to risk avoidance, mitigation focuses on the aftermath of a disaster and the steps that can be taken prior to the event to reduce adverse and potentially long-lasting effects.

Idealistically, a company would be prepared for all potential risks and threats and would avoid them entirely. Having a risk mitigation plan, however, can help an organization prepare for the worst, recognizing that some level of damage will occur and having systems in place to deal with it.

Well-known companies that use this pattern are Coinbase and Beyond Meat.