Risk matrices have become ubiquitous in the business world. Risk matrices are a go-to approach for evaluating and prioritizing risks from startups to large corporations. But after decades in risk management, government, and corporate worlds, I can't help but wonder if this particular tool has been given more attention than it deserves.
Let me start by saying that I am not against using risk matrices. They can be an incredibly helpful tool for correctly assessing and prioritizing risks. But what concerns me is the idea that risk matrices are the end-all-be-all of risk management. They are only a small part of a much larger process.
Before we can even get to a risk matrix, we need to identify and analyze risks. This process involves gathering data, assessing the likelihood of the risk, and evaluating its potential consequences.
These inputs are then used to populate the risk matrix and determine the level of risk. However, even once we have this information, the risk matrix alone does not provide a comprehensive risk management plan.
Instead, we must look at various tools and techniques to develop a comprehensive risk management plan. For example, bowtie analysis is a visual risk assessment tool that maps out potential hazards and their consequences. It clearly explains the risks and controls needed to prevent or mitigate them.
Similarly, fault tree analysis is a great analysis tool for the causes of an undesirable event. It identifies the events that can lead to failure and their possible causes. It is an effective way to identify the root cause of a problem and develop preventive measures.
In reality, risk management is a complex process that involves multiple inputs and analyses. It requires a deep understanding of the risks and controls to prevent or mitigate them. This is where I think risk matrices fall short. They provide a quick and easy way to prioritize risks but do not provide the depth of analysis needed to fully understand the risks involved.
So why have risk matrices become so popular? I think part of it has to do with our desire for simplicity. We like to think that simple solutions can solve complex problems. But as I (and I'm sure most people) can attest from first-hand experience, the world is rarely that simple.
Another reason may be that risk matrices are a well-established tool everyone understands. It is easier to use a tool that everyone is familiar with than to introduce a new approach that may require additional training or education.
However, I worry that relying too heavily on risk matrices can lead to a false sense of security. By focusing solely on the risks that are identified and prioritized in the risk matrix, we may miss other risks that are equally important but not as well understood. This is why using various tools and techniques to develop a comprehensive risk management plan is important.
A well-designed (and I emphasize that they must be 'well-designed') risk matrix can be a helpful tool for assessing and prioritizing risks. However, they are not the only or most important tool in the risk management process.
To truly understand the risks involved and develop an effective risk management plan, we must look beyond the risk matrix and use various tools and techniques to better understand the risks involved.
Some Additional Thoughts on Risk Matrices
How to Maximize the Efficacy of Risk Matrices has a cool graphic showing the relationship between a risk matrix and the ISO31000 risk management process.
Another article looks at how to design a risk matrix and avoid some of the common pitfalls, and this light-hearted guide discusses how to use them incorrectly (hint: do the opposite).
You will find a lot of criticism of risk matrices, much of it from the ill-informed or consultants with something to sell. Here is my critique of the criticisms of risk matrices.
And if you'd like to download some templates and starter packs, you might like to visit the SRMBOK website.
