What Is a Risk Assessment Matrix? And Why Is It Important?
Did you know that the chances of dying in a plane crash are 1 in 11 million*? (whereas your chances of dying in a car accident are 1 in 5,000) Transportation by air is far safer than driving. However, you may still feel unsure even though statistics tell you that your gut feeling is wrong. What you need to know additionally is another factor: Impact. If you combine and compare the probability and the impact, you may convince your instincts. If you don’t convince, don’t worry about you can use this information in your business life at least.
But How?
(With the Magic touch of Risk Matrix)
A risk matrix is a tool that helps you visually understand the risks your organization faces and their overall likelihood and severity.
Well, This combination is one of the backbones of Risk Management. And It is basically a Risk Matrix definition. A risk matrix is a tool that helps you visually understand the risks your organization faces and their overall likelihood and severity. So, after registering, qualifying, and quantifying all risks, you are putting all foreseeable occurrences in one matrix, so that it can understand what should you do with these risks. With the X axis & Y axis, you can spot which risk severity and possibility. This matrix could be 3x3, 4x4, or 5x5.
It is a trap!
( calm down, it is not)
This colorful table seems to recall our kindergarten drawing memories however it is a powerful tool. It is a simple mechanism to increase risk visibility and facilitate management decision-making. In this matrix, generally Green, Yellow, Orange, and Red colors defined which risk cluster where. Another importance comes from how to react to this cluster’s risks.
- Green (Low Risk): Acceptable— Areas where no additional measures are required to reduce risk — With Good Practice of Engineer, manageable in the Team.
- Yellow / Orange (Medium-High Risk): Tolerable— Areas where the risks have been reduced as much as possible (a.k.a. “ALARP area”: As Low As Reasonably Practicable)
- Red (Critical Risk): Not acceptable, need management attention — Cannot resolve in the team!
Advantages of the risk matrix
In addition to those, the risk matrix has some benefits worth mentioning:
- Identifies the most important risks of the project.
- Presents the risk situation visually and comprehensively.
- Easy to Understand Risk Situation— it does not require prior knowledge.
- Create and present a risk situation with little effort.
Living in a world where there would be no risk happen would be like a dream. However, trends change quickly in today’s global BANI market, so the risk cannot be avoided. In the best case prepare ourselves with good tools, make better gestimations, and put all story in visuals. Because humans respond to and process visual data better than any other type of data. In fact, the human brain processes visual content 60,000 times faster than text*.
If you enjoyed reading this article on the risk matrix, you might want to check Why Risk Management is more important than ever? and Positive & Negative Risk . Cheers!
