A risk matrix is a tool that can help you visually understand the risks your project faces and their overall likelihood and severity.
All risk matrices follow the same basic structure. They are typically 5x5 grids that show the likelihood of risks occurring along the Y-axis and the severity of their consequences along the X-axis. Each axis follows a scale from very low to very high risk. The risks your project might face are placed within the risk matrix depending on where they fall on this scale. This helps you determine risk levels.
Severity x Probability = Risk Level
If the risk is high on the probability scale and effective conduit cn mobile numbers list high on the severity scale, the risk level can be defined as very high. Conversely, if the risk is low on the probability scale and low on the severity scale, the risk level would be very low.
Within a risk management matrix, risk levels are further highlighted with a color-coded system. A risk that has a low overall risk level is color-coded green. If it is medium, it is shown in yellow or orange. A high overall risk is represented in red. This traffic light system makes it easy to quickly understand risk levels.
Despite this basic structure, a risk severity matrix can vary widely depending on your organization and how you use it.
For example, the probability axis can be broken down into more specific categories, such as “certain,” “likely,” “possible,” “unlikely,” and “rare.” Categories along the consequence axis could be labeled “very low,” “low,” “medium,” “high,” and “extreme” or “catastrophic.” How you label these categories depends entirely on how you want to fit your project.
Examples of a risk matrix
risk-matrix-1
As you can see, the risk matrix is a fairly simple tool, although it can become more complex depending on how you decide to use it within your project.
Imagine you are carrying out a risk assessment for your daily life. There are many risks we might face every day, many of which we don't even think about. Some risks from ordinary activities might be:
Reading - making a paper cut
Traveling – having a car accident
Eating – getting food poisoning
You can enter these risks into the risk matrix as follows:
risk-matrix-2
Paper cuts are certainly a possibility when turning pages. But since it won't cause you any serious harm, the overall risk remains low: it won't stop you from picking up that book.
Food poisoning may be less likely, but the consequences could be more serious. Still, you're unlikely to end up in the hospital, and the risk won't stop you from making dinner.
Then there is the possibility of a car accident. If it is a major incident, the consequences would be much worse than a paper cut or an upset stomach. For that reason, the overall risk is medium. That is why we need driving licenses, insurance and seat belts. In other words, actions that seek to mitigate risk.
As you can see from these examples, where risks fall within the risk matrix is highly context-dependent. Therefore, it is important to thoroughly analyze the risks and understand the individual circumstances of your project, in order to assess risk levels as accurately as possible.
How to create a risk matrix
Creating a risk matrix contains steps similar to those in a standard risk management process:
Identify risks: What events could prevent your project from achieving its objectives?
Assess the risks: This is where the risk matrix really comes into play. At this stage, you need to assess the likelihood or frequency of the risks, as well as their severity.
Enter the risks into your matrix: Now that the risks have been identified and assessed, entering them into the risk matrix will help you prioritize and address them.
Monitor risks: Risks and risk levels are not guaranteed to remain the same once they are entered into the risk matrix. Since risk management is an ongoing process, you will need to update the risk matrix to ensure it is accurate.
How to use a risk matrix
The risk matrix will now visually indicate the risk levels your project faces. The risk matrix can be interpreted as follows:
Green risks: The risk here is low, so they can usually be accepted. Measures to avoid or mitigate risks are probably not necessary.
Yellow risks: The risk here is medium, so you should consider risk mitigation actions to reduce or resolve the consequences.
Red risks: These are exceptionally high risks, so adopting a strategy to eradicate them is essential to avoid them.
You can also use a risk management matrix when reporting on risks, which is an important element of the risk management process. Risk matrices are useful for communicating, in an easy and visual way, the risks your project faces and the levels of those risks. Therefore, it can be useful when sharing risk assessment information with everyone involved in the project. Remember to keep the risk matrix up to date so that it remains a useful and accurate tool.