A risk assessment matrix is an essential tool in project management for evaluating and managing potential risks. It allows project teams to assess the level of risk associated with identified risks and make informed decisions. By categorizing risks based on their likelihood and consequence, a risk assessment matrix provides a systematic way to prioritize actions and allocate resources effectively.

It is a method of improving the visibility of an organization’s risks with an assessment based on multiplying the likelihood that a risk will occur by its impact on the organization. It enables project managers to identify calculated risks and evaluate their potential impact on project outcomes. By considering the identified risks within the context of the project’s objectives, stakeholders can develop mitigation strategies and allocate appropriate resources to address potential risks.

Risks can also generally be classified into high risks, medium risks, and low risks. A high-level risk has a higher chance of occurrence and can cause significant damage to the organization. A Medium risk has a 50% chance to occur and will cause damage but not too high or low. A low risk has low chances of occurring and will not cause any severe damage. However, in some cases, the chances of the risk appearing might be low, but it could cause severe damage. It depicts a visual form of risk assessment with the highest level of risks at one end, the lowest level on the other, and medium risks in the middle. It often uses color-coding to represent different levels of risks to identify where to give more attention. 

How can a Risk Assessment Matrix Help?

It contains a set of values for a risk’s probability and severity. The following image depicts a 3×3 risk matrix with 3 levels of likelihood and 3 levels of severity.‍

Benefits of a risk assessment matrix

1. Identify the risks that should be prioritized
2. Provide a simple and graphical portrayal of risks
3. Simplifies areas of risk management process
4. Identify areas of risk mitigation

A risk assessment matrix is a document that should evolve as your risks evolve. One of the most important factors when managing projects is analyzing potential project management problems with a risk assessment matrix.

Building a Risk Assessment Matrix

To create a risk assessment matrix, you can follow these steps:

1. Define Risk Criteria: Determine the criteria you will use to assess and categorize risks. This typically involves establishing likelihood (probability) and consequence (impact) scales. For example, you might use a low, medium, and high scale for both likelihood and consequence.
2. Create a Grid: Create a grid or table with the likelihood categories along one axis (e.g., rows) and the consequence categories along the other axis (e.g., columns). This will form the basis of your risk assessment matrix.
3. Assign Ratings: Assign ratings to each intersection point in the grid based on the defined risk criteria. For example, the intersection of “low likelihood” and “low consequence” might be labeled as low risk (L), while the intersection of “high likelihood” and “high consequence” might be labeled as high risk (H).
4. Color or Number Coding: Optionally, you can assign specific colors or numerical values to each rating to enhance clarity and visual impact. For instance, you might use green, yellow, and red colors to represent low, medium, and high risks, respectively.
5. Customize Labels: Customize the labels and categories used in the risk assessment matrix to align with your organization’s terminology and context. This will make it easier for stakeholders to understand and interpret the matrix.
6. Populate the Matrix: Assess and document the risks in your specific context by placing them in the appropriate cells of the matrix. Evaluate each risk based on its likelihood and consequence, and assign the corresponding rating.
7. Analyze and Prioritize: Analyze the populated risk matrix to identify high-priority risks. These are typically risks that fall into the high likelihood and high consequence categories, as they pose significant potential impact.
8. Risk Mitigation: Develop and prioritize risk mitigation strategies for the identified high-priority risks. Determine appropriate actions to reduce the likelihood or consequence of each risk and allocate necessary resources to implement these measures.

Remember that the risk matrix is just one tool in the risk management process. It helps visualize and prioritize risks but should be complemented with thorough risk assessments, regular reviews, and ongoing monitoring to ensure effective risk management within your organization.

The risks can create havoc in your organization if you do not maintain a matrix. A GRC platform like VComply can help you perform risk management and design internal controls that keep your organization compliant.  VComply provides an uncomplicated way for you to manage compliance and risk, allowing you to assign controls and track them through an intuitive interface.

Request a demo today to learn more about how VComply can help your business.