An organization needs to analyze risks that might occur and find ways to prevent them or reduce their impact. It helps them to act confidently on essential business decisions. Risk management is the identification, assessment, and prioritization of risks and taking steps to reduce risks to an acceptable level. In first, organizations need to identify and prioritize risks. Once they identify the risks, they need to conduct an in-depth assessment of risks. A risk assessment matrix plays a significant role in risk management. It is an essential tool that helps identify and prioritize risks by evaluating the likelihood of a risk occurring and the severity of each risk if it were to happen. 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.
What is Risk Assessment Matrix?
Risks can also generally be classified into high risks, medium risks, and lows 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. A risk assessment matrix depicts a visual form of risk assessment with 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?
A risk assessment matrix contains a set of values for a risk’s probability and severity. The following image depicts a 3×3 risk matrix that has 3 levels of likelihood and 3 levels of severity.
Benefits of a risk assessment matrix
- Identify the risks that should be prioritized
- Provide a simple and graphical portrayal of risks
- Simplifies areas of risk management process
- Identify areas of risk mitigation
A risk assessment matrix is a document that should evolve as your risks evolve. When managing projects, one of the most important factors is analyzing potential project management problems with a risk assessment matrix.
If you do not maintain a risk assessment matrix, the risks can create havoc in your organization. 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.