Risk matrix model

2. What Is A Risk Assessment Matrix
A risk assessment matrix is the table (matrix) used for allocating risk
ratings for risks that you identify, based on two intersecting factors:
the likelihood (or probability) of a security risk-based event
occurring, and the consequence (or impact) to an asset if it did. Such
a matrix is vital to any risk assessment template as it is used to derive
both current and treated/mitigated risk ratings.
Likelihood
Likelihood is a qualitative assessment that explains how likely a Risk
will occur. Qualitative assessments are based on opinions; it is
difficult to put an exact number on the assessment. Risk Likelihood
means the possibility of a potential risk occurring, interpreted using
qualitative values such as low, medium, or high.
Consequence
Consequences are the possible outcome of an undesired event, and
may involve loss of or damage to values we want to protect.
Consequence is estimated by first imagining the outcomes of an
undesired event. One event can have several different
consequences.
Risk = Likelihood * Consequense

3. Risk matrix model

4. Benefits of risk assessment matrix
You might be wondering if it’s worth spending the time to assess
risks and create a matrix for all of your projects. Well, the benefits of
a risk assessment matrix speak for themselves:
You can prioritize all risks with an understanding of the level of
severity. Having an overview of all potential risks allows you to
prioritize them against one another if multiple risks occur. This
prioritization will benefit your project team and help keep them on
track if the project does go awry.
You can devise strategies and allocate resources for the unexpected.
While it’s impossible to fully plan for uncertainty, acknowledging and
understanding what risks could occur provides an opportunity to
create action plans for those unexpected events. Appropriately
planning for risks increases the likelihood of project completion and
success.
You’ll reduce or neutralize the impact of risks that occur. The
unexpected consequences of a risk that’s not thought about in
advance might feel more severe and damaging than a risk identified
and analyzed early on. Having an awareness of the potential impact
can reduce or neutralize the effect of a project risk before it occurs.
Hope for the best, but prepare for the worst.

5. Challenges of a risk matrix
While risk matrices can be very useful for identifying and preparing
for project risks, they are not an answer to all your project problems.
Here are some of the challenges of risk matrices:
Inaccurate assessments: The risk matrix categories may not be
specific enough to compare and differentiate between risk levels
accurately. The severity and likelihood of certain risks are often
subjective and therefore unreliable.
Poor decision-making: Incorrectly categorized risks can lead to poor
decision-making since you do not have an accurate picture of
potential issues.
Doesn't account for timeframes: Risk matrices don't differentiate
between risks that could occur two weeks from now and risks that
could occur in two years' time. There is no consideration of how risks
could change over the years.
Can oversimplify risks: The complexity and volatility of risks can be
oversimplified — some risks remain the same over time, while others
can change overnight.
How do you calculate risk in a risk matrix
A risk matrix is a valuable tool for your project planning, and creating
one doesn’t have to be complicated. Follow these steps to calculate
risk for a project of your own.
Step 1: Identify the risks related to your project

6. To complete your risk assessment matrix, you need to start by having
an in-depth understanding of your project — the scope, budget,
resources, timeline, and goal. You’ll need this information to help
you spot the potential risks.
Identify as many risks as you can with your project team. Consider
aspects like scope creep, budgetary constraints, schedule impacts,
and resource allocation as the starting points for your risk
identification process. Create a risk register complete with all of the
identified risks, as it will make it easier to create your matrix.
Step 2: Define and determine risk criteria for your project
No two risks and no two risk matrices are alike, which means you’ll
need to work with your project team and key stakeholders to define
and determine the risk criteria you’ll use to evaluate each risk you’ve
identified.
Remember that two intersecting criteria need to be specified, each
with its levels: the probability or likelihood that the risk will occur
and the severity or impact the risk will have.
Step 3: Analyze the risks you’ve identified
After you’ve identified and described all of the potential risks, the
next step is to anal
yze them. In your analysis, use your risk criteria to categorize each
risk within its appropriate severity level and probability.

7. Many matrices assign a number value to criteria. So, sticking with our
example, you might rate the impact ranging from one (insignificant)
to five (catastrophic) and do the same with likelihood, where one
represents very unlikely, and five represents very likely.
Using the matrix, it’s then easy to multiply severity times likelihood
to get a number value. A risk that’s catastrophic and very likely
would rank as a 25, whereas one that’s insignificant and very unlikely
would rank as a one. It’s a simple and intuitive way to compare and
understand risks.
Step 4: Prioritize the risks and make an action plan
Your final step is to prioritize the risks and create risk management
plans to mitigate or neutralize them, with your risks categorized
accordingly. You’ll want to outline the steps you’ll take if the risk
does occur and the strategies you’ll deploy to help get the project
back on track.
Use of a risk matrix result
So, what does a risk matrix accomplish for you? The short answer is
that your matrix results help you create a risk response plan.
To start with, it’s crucial to address the risks that are ranked high or
extreme. Depending on the project and your team’s resources, you

8. may only need to monitor the medium and low-risk categories rather
than taking immediate action.