How to Use a Risk Assessment Matrix (With Example)
What is a risk assessment matrix?
A risk matrix is sometimes also called the Probability Matrix, or Impact Matrix. This is an
effective tool that can help in risk evaluation by focusing on the probability of potential risks.
A risk assessment matrix can help you calculate project risk quickly. It does this by identifying
the things that could go wrong and weighting the potential damage. This makes it easy to
prioritize problems. Action will be needed in order to keep a project on course, and safe as well.
Project managers should think about potential risks in order to avoid risk events from happening.
While managing uncertainty sounds challenging, there are more and more calculating risk tools
available today that can help and require little effort on your part. Simply create your own risk
assessment matrix and use it as many times as you need.
Here are some benefits that you can take advantage of when making your risk matrix:
• You will be able to prioritize the risks with the level of severity.
• You get a simple process for the management of risk.
• It helps you in finding the potential risk with minimal effort.
• Information is recorded and audited.
• It demonstrates the organization’s ability to managing risk.
• It helps in neutralizing any possible consequences.
How to make a risk assessment matrix
If you want to do your own risk assessment matrix, you can start by defining the scope of work.
Depending on what you are trying to improve, you need to identify different areas of risk.
Choose your objective and make sure it is clear as possible.
Step 1: Identify Hazards
In order to start, you want to go for as many risks as you can. The idea behind this is to get
different views. A brainstorming session could be of help. The list that you get is going to be the
foundation of the risk assessment matrix.
Connected with your scope, the list needs to belong and detailed. It can include anything from
theft, to burns, and even pollution. It is really important that you think at all potential risks for
any new project you are working on.
You can also think about what happens when you identify them. But not to worry, we will
discuss that soon enough.
Step 2: Risk Analysis
The risk analysis is not something to take lightly. There are certain steps that you need to follow
in order to do effective management of risks. When an organization has pitched all the right
risks, the next step is going to carefully evaluate them.
A risk assessment matrix focuses a lot of chances and consequences as the main focus. But
depending on the organization, we are talking about you can encounter terms like “vulnerability”
or “speed of onset”.
Step 3: Determining Risk Impact
Any risk assessment matrix means that you will need to check probabilities and consequences of
risk events that might happen. The results of such assessments are used to make a top of risks in
order to find the most important ones, as well as less critical ones.
In a risk chart, you can see exactly how both high-risk and low-risk factors are shown. The
impact of a successful attack can be split into two types: “technical impact” and the “business
impact”.
Step 4: Prioritize the risks
When you will see a risk assessment matrix, you will be able to compare different levels of risk.
It can include any internal rules or policies.
One thing that should be noted is that the risk assessment process can be an ongoing evolution. A
matrix needs to change at the same time with changes that appear in your company. If it is done
one time per year, emerging risks could go unnoticed or even undetected.
How to use the risk assessment matrix?
When the risk assessment process is complete, you can start to take data into the matrix. Any risk
assessment matrix uses two axes, one that measures the likelihood, and the other one measures
the consequence result.
Likelihood: the probability of a risk
Depending on the likelihood of the occurrence of the risk, the risk can be classified under these
categories:
– A risk that is almost guaranteed to show up during the execution of the project. Any risk that is
more than 85% likely to cause problems is going to fall under this category.
– Risks that have a 60%-80% chance to occur can be grouped as likely.
– Risks that have a 50/50 probability of occurrence are named occasional.
– Seldom are the risks that have a low probability of occurrence.
– Unlikely are the risks that have almost no probability of occurring.
Consequences: the severity of the impact or the extent of damage caused by the risk
The consequences of risk can be ranked into five categories. These are based on how severe the
damage can get.
• Risks that can cause a negligible amount of damage are called insignificant.
• Risks that have a small potential for negative effects are called minor.
• Risks that do not impose a great threat but are yet sizable damage can be classified as
moderate.
• Risks that have substantial negative effects and are going to impact in a serious way the
success of a project is called critical.
• Risks that come from human error or the environment. Other causes can be procedural
deficiencies or major system loss. This will require the closing of the operation and is
called catastrophic.
Knowing what elements a risk assessment matrix has is important. This is going to help you and
your organization to manage risk effectively and reduce workplace incidents.
The risk assessment matrix is a document that has to be updated and maintained with curiosity.
Risks are evolving and the matrix should do the same. Certain events are going to trigger the
need for a refresh. One could be like establishing an enterprise risk management program.
Risk management tools, such as a risk assessment matrix, can help identify the risks associated
with a project and how to address them.
What is a risk assessment matrix?
Many companies use a risk management tool, such as a risk assessment matrix, in the risk
evaluation process to determine the right steps in business decisions.
A risk assessment matrix can come in the form of a chart, where you plot the severity of possible
risk on one axis and the probability of this event occurring on another. You could also format
your matrix as a table by listing your potential risks in rows and entering the probability and
severity information as columns.
By providing a visual representation of complex data, you can use a risk assessment matrix to
facilitate and simplify the risk evaluation process and help you make more informed decisions
related to your business.
The benefits of using a risk matrix
There are several benefits to creating and using a risk matrix to evaluate projects, including that
they help:
• Identify areas to reduce risk quickly and easily
• Explain specific risks in a clear way
• Prioritize and group project event outcomes
• Outline a foundational resource for subsequent detailed analysis
How to use a risk assessment matrix
To use a risk assessment matrix during the risk evaluation process effectively, take the following
steps:
1. Identify all potential risks
The first step in the risk assessment process is to identify potential risks. To maintain a structure
that is easy to manage, the risk assessment process offers a way to prioritize risks by evaluating
potential risks. After you identify all risks, the next step is to order risks from most impactful to
least impactful.
2. Sort risks according to probability and impact
Now you are ready to sort risks according to their probability and impact.
Probability
This describes the likelihood of a risk occurring. You can use different approaches to sort risk
probability. Some companies, for instance, assign potential risks a probability percentage that
ranges from 0%—that is, no possibility of the risk occurring—to 100%, in which case the risk is
certain. Or, you can sort risks according to categories, such as:
• Unlikely: Put potential risks in this category if they are highly unlikely to materialize.
• Seldom: This category is for uncommon risks that have a small chance of materializing.
• Occasional: Sort risks in this category that have a roughly 50-50 chance of taking place.
• Likely: If a risk is probably to occur, you should place it in this category.
• Definite: This is for risks that are going to occur. When coupled with high impact, you
should regard this kind of risk as a priority, and address it right away.
Impact
This aspect of risk points to how severe the impact will be if a potential risk actually manifests.
The impact of a specific risk materializing could influence various aspects of the project, and
potentially, the company as a whole. In project management, ompanies often evaluate risk
impact according to the negative effect it may have on three important aspects:
• Schedule: Will it negatively affect time frames for delivery?
• Cost: Will you have to adjust the budget?
• Technical performance: If the risk occurs, how will it affect performance?
As is the case with evaluating the probability of a risk, you could sort the severity of risk impact
in the following ways:
• Insignificant: Place risks that will have little to no negative impact on a project in this
category.
• Minor: Place risks that may have a slight negative impact on a project but will not likely
cause any major disruptions in this category.
• Moderate: This category is for risks that pose a moderate threat to operations.
• Critical: Place risks that pose a significant threat to the successful execution of the project
in this category.
• Catastrophic: This category is for risks that will in all likelihood jeopardize the whole
project and significantly impact daily operations should they occur. These risks are high-
priority.
3. Decide on risk ranking
Next, plot the risks according to their probability and impact on the risk assessment matrix. After
you plot the information, you will have a clear visual representation of what priorities the
potential risks should have.
For instance, risks that are very likely to occur and will have an extremely negative impact on
operations will appear as the highest-priority risks on the matrix. On the other hand, those that
are both unlikely to occur and pose no significant threats should they occur will fall under low-
priority risks.
4. Decide on preventative measures
Draw up contingency plans to deal with worst-case scenarios. This last step in the risk
assessment process helps you determine how you should deal with middle- and high-ranked
risks.
Example of a risk assessment matrix
Here is an example of risk impact/probability chart that consists of varying degrees of risk
probability and risk impact:
The four corners of a risk impact/probability matrix show extremes that typically have the most
actionable insight and include:
• Low probability/ low impact: Risks in this corner of the chart are both low probability
and low impact. You do not need to pay attention to these risks.
• High probability/ low impact: This kind of risk poses a moderate threat to operations.
Although you should try to minimize the possibility of such events occurring, you can
manage these risks if and when they take place.
• Low probability/ high impact: This type of event will have a high impact on operations,
but the probability of them materializing is unlikely. In order to avoid such risks
occurring, you should take all possible preventative steps. You should also put
contingency plans in place to minimize the severity of the impact should the risk
manifest.
• High probability/ high impact: The risks in this category are the highest-priority risks
because they have a high probability of occurring and would also have a severely
negative effect on operations. This means that you should give these risks the most
attention and should take them into consideration in the daily decision-making process.
Medium-priority risks could seriously impact the profitability and overall successful
implementation of a project, the occurrence of high-priority risks may not only potentially signal
the end of a project, but could also have a serious impact on the organization as a whole.
Rarely do projects get launched without running into some kind of problem. Living in a world
where this does not happen would be like a dream. However, in today’s world market, trends
change rapidly, so the risk cannot be avoided.
If you are launching your business, you should consider doing a risk assessment matrix. Even
when you are doing a new task, one of the questions that you should ask is, “What could go
wrong?”. In the modern digital world, a lot of online tools exist that help and automate building
the forecasts and planning your new business but in many cases, it’s still good to do this
manually.
A risk assessment matrix is a tool that was developed to analyze risk. Yes, we can use data to
analyze risks. By doing so, any organization can detect and prioritize different risks. They do this
by estimating the probability of occurrence.
