Risk assessment matrix basically refers to a project management method or tool that offers you a one-page overview of the likely risks assessed with regard to the probability or likelihood of the particular risk and the consequences attached to the severity. Examples of the several probability degrees include likely, frequent, seldom, occasional, or unlikely. Severity examples include critical, catastrophic, negligible, or marginal. Activities that go down as both catastrophic and frequent will be considered very high risk. Activities that are negligible and unlikely would be deemed low risk. Besides identifying risks, the matrix needs recommendations for minimizing or eliminating these risks.
Making the Matrix
Preparing this matrix is relatively easy since the majority of the data required could be easily derived from risk assessment forms. The matrix is made as a basic table where risks get clustered based on their prospects and the type of consequences or extent of damage the risks could lead to.
Preparing a matrix for risk management is the next step in the risk management process, and it succeeds the initial stage of filling up the risk assessment form for ascertaining potential risks. Risk assessment form preparation task is a lot elaborate and entails gathering risk information, determining risks, ascertaining the odds and the risks’ impact levels, comprehending consequences, creating risk prevention strategies, and assigning properties. A risk assessment matrix would, on the other hand, just offer the project team an easy and quick picture of the threats and the urgency with which each of these risks should be handled.
Placing Risks Within the Matrix
As aforementioned, risks are positioned in the risk assessment matrix using two criteria:
• Likelihood, or a risk’s probability
• Consequences, or the impact’s severity or the damage the risk causes
Based on the risk occurrence’s likelihood, the risks could be categorized as:
• Definite: Risk that would most certainly show up in project execution. More than 80 percent of the risks that would likely cause issues fall under this classification.
• Likely: These are risks with 60 to 80 percent chances of occurring.
• Occasional: Risks that have a 50 percent chance of happening.
• Seldom: These risks have very low probability but not low enough to be completely ruled out.
• Unlikely: These are exceptional and rare risks with a likelihood of less than 10 percent.
A risk’s consequences could be ranked and categorized as:
• Insignificant: Risks that could cause negligible level of damage.
• Marginal: Risks that will cause damage, but the damage won’t be major.
• Moderate: Risks that don’t pose a large threat, but the damage could be moderate.
• Critical: Risks with major consequences that could result in huge losses.
• Catastrophic: These risks would render a project completely unfruitful and unproductive.