The “Risk Matrix” – Explained
The Risk Matrix is also popularly known as the Probability and Impact Matrix. The Risk Matrix is used during Risk Assessment and is born during Qualitative Risk Analysis in the Risk Management process. It is a very effective tool that could be used successfully with Senior Management to raise awareness and increase visibility of risks so that sound decisions on certain risks can be made in context.
A risk is “rated” for its Probability and Impact on a scale to understand where on the Risk Matrix it lies. Which Risks in the process move forward into the Risk Management process will depend on the industry, company, project and people. Some are by nature more risk tolerant than others. For example, we can have a project where the team agrees that any risk that is in the yellow, orange or red cell can move forward in the Risk Management process. The rest remain in the watch list and are “accepted”. Another project could have different criteria.
The Probability and Impact “Scales”:
It is recommended that companies have standard scales on their projects for how risks can be rated. This will help everyone be on the same page. A sample scale is provided below.
Probability: A scale of 1%-100% will be used for Probability.
(1-20)% means very low
(21-40)% means low
(41-60)% means medium
(61-80)% means high
(81-100)% means it is a fact
Impact: A scale of 1-5 is normally used for impact ratings where;
1 means negligible
2 means minor
3 means moderate
4 means significant
5 means severe
The above image shows the Threat as well as the Opportunity Matrices in Vue-Matrix, our Project Risk Management Software application.
The numbers in each cell indicates the number of risks in that cell. These cells can be drilled down into to view the risks directly from the matrix itself.
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