First of all, WHAT IS RISK ASSESSMENT MATRIX?
Risk assessment matrix is an analytical tool used to define the level of risk by plotting the likelihood of the risk against the severity of the consequence.
RISK LEVEL (Severity) = Likelihood x Consequence
The likelihood can be:
- Definite: Almost certain to show up on the course of the project. Has over 80% chance
- Likely: Has 60 – 80% chance of showing up.
- Occasional: Has 50/50 chance of occurrence.
- Seldom: Has less that 50% chance of occurrence
- Unlikely: Rare risk with less than 10% chance of occurrence.
The consequence of the risk can be:
- Critical or
The risk assessment matrix is made in a form of a table where risks are grouped based on its likelihood and severity of consequence; colours are used to segment the table. The table is generally segmented into four (4) colours – Green, yellow, orange and Red. (See picture above)
The different colours shows the different risk rating (severity):
Green – Low risk (L): The risks here are seen to be insignificant.
Yellow – Medium (M): Risk here needs reasonable steps to be taken against it. It is not mostly urgent and resource intensive.
Orange – High risk (H): Risks in this category calls for immediate action. If the possibility of resolving it immediately is not there, strict timeline has to be set to get it resolved.
Red – Extreme (E): Risks here are so critical and need immediate action.
Why should we use the risk assessment matrix?
It assist in decision-making when determining how best to manage risk. It will help the management to take an informed decision since the risk assessment matrix will help increase the visibility of the risk.
Advantages of the risk assessment matrix
- It helps categorize risk adequately
- Help in prioritizing the process of risk management
- Avoid allotting resources to managing risk indiscriminately
- Guide in tackling risk effectively based on the severity
NOTE: Risk matrix comes after the filling up the risk assessment form. Filling of the risk assessment form involves determining the risks, gathering risks data, determining the probability and the impact level of the risk, understanding the consequence, etc.
Based on the information from the risk assessment form, it will be easier to place each risk in the risk assessment matrix appropriately.
Typical example how the risk assessment matrix works:
Project – Roofing of a 24 Storey Building
Risk identified – Fall from height
Likelihood – Above 85%
Impact level (Consequence) – Fatality
Based on the information above, the risk “FALL FROM HEIGHT” will occupy the first row-fifth column (Almost certain & catastrophic) in the risk assessment matrix highlighted in this article.
This also shows how you can utilize the information in the risk assessment form to categorize risk in the risk assessment matrix.