Listen to: "Enterprise Risk Management [Part II]: What is a Risk Assessment Matrix?"
As we continue our exploration of various strategies, solutions and tools to support optimal Enterprise Risk Management (ERM) and other risk mitigation approaches, it is important to take a closer look at the risk assessment matrix.
Graphical representations of meaningful data have always served as crucial staples in any business environment. At-a-glance presentations of tomes of information is an invaluable tool when it comes to sharing risk insights with managers, employees and third party stakeholders. A carefully prepared graph or chart instantly makes large volumes of data, statistical intricacies and other complex results far less intimidating for those looking at those criteria with somewhat less trained eyes in a given environment.
Imagine making it easier to view and share the results of your most recent risk assessment with your organization’s board and management, making it simpler to sort out issues on the horizon, as well as those that you put to rest. A risk assessment matrix may be just what you need to add to your tool kit.
What Is a Risk Assessment Matrix?
A risk assessment matrix is a chart that reveals core information discovered in a risk assessment. The results ultimately assist you and your team in controlling the risks you uncover in your risk assessment.
A risk assessment matrix plots and points out the severity of a specified possible event on one axis while the probability of that event’s occurrence lies on the other axis. You can either plot your matrix as a chart or a table, depending on the data that you want to extract, show and share.
Basically, a chart is quickly and easily understood, thanks to the inclusion of only the most essential information, which serve as the equivalent to bullet points in visual form.
This snapshot of your risk assessment data gives you the tools to quickly and clearly see existing and potential risks. At the same time, you can see each respective risk’s impact, as well as identifying which risks are the highest priority that require your attention. The best part of all is that this head’s up gives you the chance to stay ahead of the risk and create a plan for effectively responding to the risks that pose the most risk and need the most urgent attention.
To Table or to Chart Your Risk Assessment Matrix?
Charts are highly effective simplifications of data, coming in forms that include pie charts, bar charts, line charts, histograms and tree charts. Depending on what you want to share as a broad data representation, you have an abundance of chart styles from which you can choose. Basically, a chart is quickly and easily understood, thanks to the inclusion of only the most essential information, which serve as the equivalent to bullet points in visual form.
If you want to provide a more in-depth analysis of the criteria you extract for your risk assessment matrix, a table may work better. A risk assessment matrix in table format allows you to develop more complex columns that expound on the data regarding the risk likelihood and impact. At the same time, the corresponding rows show the related risks, providing a more intensive visual representation that is still easy on the eyes.
Preparing Your Risk Assessment Matrix
When it is time to table your risk assessment matrix, gather your risk assessment report, which may include a risk register or risk log. Work with a few key members of your team to develop your table that will include a column that reflects the probability of each occurrence and a series of rows that reflect the impact.
Your “Frequency of Events/Occurrences” column may contain the following:
The corresponding rows show the “Severity of Impact/Consequences and may include the following types of responses:
Together, you and your team should rate the probability and impact of each risk from low to high, based on your daily experience and familiarity with the risk assessment results. This subjective exercise helps you and your management team take a more intensive look at the risks and their potential outcomes to reasonably challenge the risk assessment matrix for even better accuracy.
Are You Planning to Incorporate a Risk Assessment Matrix into Your ERM?
Are you looking for ways to streamline your risk assessment results for an upcoming meeting or daily use? This handy tool truly simplifies large portions of data into easily understandable graphs and tables that save time and effort for everyone.
At I.S. Partners, LLC., we work with many organizations that are trying to find better visual representations of large volumes of crucial data. We can help you too.