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Risk Matrix

A problem when you have a number of possible risks is to decide which ones are worthy of further attention. The Risk Matrix is a simple tool to help prioritize risks.

There are two main dimensions to risks: (a) How likely they are to occur and (b) The Impact that they would have, should they occur. A common way of quantifying the risk is to assign a numeric value to these and to multiply these together (as in Risk Exposure and as used in FMEA). However, a problem with this is that high-probability/low-impact risks get the same score as high-impact/low-probability risks, about which you may well have very different view.

The Risk Matrix simply puts Probability and Impact on two sides of an x-y chart and then the risks are placed within this two-dimensional space. This gives several advantages:

  • High-probability/low-impact and high-impact/low-probability risks are differentiated.

  • You can visually compare risks, thus easing the question 'is this one more or less likely that that one?'. This plays to the human cognitive preference for paired comparison rather than absolute evaluation.

  • The risks can be addressed from top right down to bottom left. High-probability/low-impact and high-impact/low-probability risks of equal Risk Exposure score will tend to be evaluated at around the same time.

  • It can be done on the wall with flipchart-paper (two pages taped together works well) and Post-it Notes.

See also:

Risk management

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