![]() The uniqueness of risk assessment matrix is that it makes company leaders aware of potential risks and to begin preparing in the event of occurrence – based on not just high probability but also business impact. The risk assessment matrix is a potent tool for any leadership team to not just be aware of the potential risks, but also stack them against the probability of their occurrence. But when these risk events are prioratized, now the leadership team can deploy resources based on high business impact and high probability of occurrence. This is because company resources are limited but potential risks may be many. The key to effective risk management is to not just be aware of the potential risk events, but also their priority. Here are the key enterprise benefits of using the risk assessment matrix: Risk management is a key aspect of any enterprise planning, invariant of industry or scale. Here is the diagrammatic representation of the risk assessment matrix:Īs you can see in this illustration, in a risk assessment matrix, as we move along the X-axis, the severity of the events keep increasing with decreasing probability of occurrence as it intersects with the Y-axis. The risk assessment matrix, thereby helps prioritize risk events for effective enterprise risk management planning. Whereas, a low impact business event may occur more frequently and has a high probability of occurrence. It is important to note that a high business impact event usually has lower probability of occurrence since it requires large scale events to have significant business impact. This matrix therefore offers 25 cells for 25 events to be plotted across the graph. The risk assessment matrix is typically a 5X5 matrix, with 5 stages of probability of occurrence and 5 levels of business impact on an inverse graph. For example, the probability of IT system failure may be low, in comparison to employee attrition, where company policies will exert less control. The probability of occurrence of these events in the order of high to low.For example, for a SaaS company, employee attrition may be classified as a lower risk event in comparison to IT system failure which directly affects products and customers, thereby causing issues with retention and sales. The risk events listed on the X-axis in the order of increasing business impact.Therefore, in the risk assessment matrix, there are two intersecting factors on the inverseX and Y axis: The matrix basically aims to measure the probability of occurrence of business risk events. ![]() Top 5 Best Practices for Creating a Risk Assessment Matrix in 2023Ī risk assessment matrix is defined as an inverse matrix on an X-Y graph, where X-axis is the risk events in the order of increasing business impact, while Y-axis is the probability of these events occurring from high to low.Steps to create a risk assessment matrix.
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