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How to Use the Risk Assessment Matrix in Project Management?

Table of Content

     

    Murphy’s law honors the inevitable.

     

    And whether you are a patron or disciple of the law or not, you have to accept the value of contingency planning which guarantees the continuity of your business/project and ultimately lowers and minimizes the impact on your bottom line.

     

    When managing projects, one of the most important factors is analyzing potential project management problems with a risk assessment matrix.

     

    How amazing would it be to have automated risk identification and analyses? Yes, there are loads of options out there but we are going to do a deep dive into an amazing new app – nTask.

     

    🚀Pro Tip: Signup for the Best Risk Management Software to create Risk Matrix. , to manage your risks, issues, projects, and tasks!

     

    We will cover in Risk Assessment Matrix:

     

    What is Risk Assessment Matrix?

     

    what is risk assessment matrix

     

    A Risk Assessment Matrix, also known as a Probability and Severity risk matrix, is designed to help you minimize the probability of potential risk to optimize project performance.

     

    Essentially, a Risk Matrix is a visual depiction of the risks affecting a project to enable companies to develop a mitigation strategy.

     

    As the aforementioned ‘Management Expert’, Murphy so pithily observed, things will go awry, and when they do the bottlenecks created in projects impact the bottom-line not to mention the delivery timelines. While most project managers may run around trying to identify and work out risks. Today’s smart project managers turn to nTask to create a Risk Matrix so easily that when I created my first one, I actually sat back in awe.

     

    There it was, normally the bane of my life especially at the onset of a project, so easily done that I couldn’t quite accept its validity. Yes, I will admit, I went through a few iterations to make sure something this easy was still plausible and logical.

     

    Those of you, who like to create and use Risk Matrices will know the Benefits of a Risk Assessment Matrix, but for the newbies or those looking to refresh their knowledge, let’s find out.

     

    Learn what is Strategic Risk Management:

    Strategic Risk Management to Gain Success in the Organizational Paradigm

     

    Benefits of a Risk Assessment Matrix

     

    When used correctly, a risk matrix will

    1. Identify event outcomes that should be prioritized or grouped for further investigation
    2. Provide a good graphical portrayal of risks across a project/task
    3. Simplifies the risk management process
    4. Help to identify areas for risk reduction
    5. Provide a quick and relatively inexpensive risk analysis
    6. Enable more detailed analysis to be focused on high-risk areas

     

    How to Create a Risk Assessment Matrix?

     

    There are some fundamental steps needed to achieve successful risk management for projects using the risk assessment matrix.

     

    Step 1: Risk Identification

     

    risk_management_hero

     

    Defining and identifying the risks associated with a project is the initial phase in risk control.  The scope of the project and task is an indication of a proactive approach to limit damages as much as possible. Pinpoint as many risks as you can to gain various perspectives. Brainstorming with the project team to acknowledge events such as fire, theft, flood, refunds, refusal by vendors, or any uncertain business situation.

     

    Some companies develop checklists from previous experiences of past projects for risk identification to manage risks. These checklists are essentially developed to identify potential risks associated with each new project.

     

    You might be asking ‘what happens after the risks are identified?’ A key process of risk management called ‘Risk Analysis’ begins.

     

    Some considerations for project risk identification include:

     

    Step 2: Risk Analysis

     

    risk_assessment

     

    The real business of project risk management starts with risk analysis. After the project team has described all the potential risks, the next step is to evaluate them. nTask’s built-in Risk Assessment Matrix, automatically populates the fields to create a matrix.

     

    This matrix can then be used to assess risk levels. Ideally, this should be done with all stakeholders using real data to support the matrix. During this session, all stakeholders need to accept and agree to the risks in order for a contingency plan to be put in place.

     

    You will need to analyze the expected damage that risk can make and come up with strategies on how to reduce its impact. The best thing is to have a meeting with the stakeholders and show them real data analysis. It’s imperative to thoroughly examine each and every factor associated with them and their possibility of occurrence for designing a strategy that will be apt in tackling them.

     

    Overall, project managers adopt an eagle-eyed approach to risk analysis and that is why every risk component is examined to develop a roadmap for risk resolution.

     

    Step 3: Assessing Risk Impact Level

     

    Here you will need to assess the impact level of the project risk. You have to identify if the risk impact is minor or critical for your project. This will help in minimizing the risk and gives you a clear direction to complete the project as planned.

     

    The nTask risk assessment matrix involves weighing probabilities against the impacts of risks when they occur. The outcomes of such evaluation help classify risks according to the most severe and the less critical. In the risk table, you will see how high-risk and low-risk factors are displayed in the grids.

     

    Step 4: Risk Prioritization

     

    nTask risk assessment matrix shows how project risks are prioritized for at different levels. Project risk assessment is a continuous process and needs to change concurrently with modifications in your organization or with consumer trends. If the matrix is reviewed only once a year, developing risks may be overlooked, leading to issues down the line.

     

    1. Critical/High Priority Risks:

     

    These risks require prompt responses and quick action. They are designated high priority because they need to be addressed swiftly. Critical risks are intensified to meet a deadline, resolve an error, or deliver an MVP timely.

     

    2. Major Risks:

     

    These are also classified as High Risks, but at comparatively low-risk compared to the extreme designation in the probability and severity risk matrix. Major/High risks are denoted by “H,” and have a unique color code like every other related cell in the matrix.

     

    3. Moderate Risk:

     

    These risks are tagged with mid-level risks. They are not a high priority and are not known to be used to develop a mechanism to resolve bottlenecks throughout the lifespan of a progressing project. This risk classification serves to help managers work around time constraints or perfect the quality of the project deliverables.

     

    4. Minor risks:

     

    These risks are of low weight. They are not of big concern but that doesn’t mean that they are not important. It’s just that the team can get to them after the rest of the risks have been mitigated.

     

    nTask Risk Assessment Matrix

     

    risk assessment matrix

     

    nTask enables you to generate a risk assessment matrix designed to provide flexible risk reporting for well-informed decision-making.

     

    The risk matrix excel comprises a grid, with the Likelihood or Probability of Occurrence at the Y-axis and the resultant Risk Impact on the X-axis. These two components are developed to represent the actual nature of risk.

     

    The probability is visualized and can be expressed as a percentage, whereas the severity is expressed in terms of probable impact.

     

    The risk component of the risk assessment matrix is placed in appropriate matrix slots called “Cells,” with its function is to show with the probability of the resulting risk outcome.

     

    At nTask, risks are assessed on the basis of severity. The color code is assigned to them by default. A moderate risk can get a ‘Red’ color, just as a high priority risk if the system determines that this risk has serious consequences. For example, if you are aware of the likelihood of severe technical difficulty hindering a project, then this kind of risk gets the “Critical” designation. Critical risk also expresses the likelihood of severe injuries, potential damages, and financial loss.

     

    Minor” indicates that little attention is required as the risk has a low probability of occurring.

     

    You can use nTask conveniently by creating an account for FREE, to get a hang of how risk assessment matrix works. We have very unique and interesting risk management features to help you run successful projects using risk mitigation plans.

     

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    Risk Impact (Risk Severity)

     

    In nTask, risk impact occurs in 4 levels:

    • Minor (Blue)
    • Moderate (Green)
    • Major (Orange)
    • Critical (Red)

     

    Risk Likelihood

     

    risk_likelihood_impact

     

    This is the possibility of the occurrence of risk in your projects. nTask Risk likelihood is split into four ranges of percentages:

    • 0-25% – less likely to occur
    • 26-50% – occasional
    • 51-75% – likely to occur
    • 76-100% – likely to cause serious problems

     

    Risk Zones

     

    Apart from these divisions, there are three major zones inside the matrix as well. After the calculations are done, the quantified risk falls into these three zones:

    • Yellow – an acceptable low-risk zone
    • Green – a moderate risk zone that may not be acceptable
    • Red – a critical zone that is high risk and unacceptable

     

    These zones make the result of a risk matrix more transparent by giving out a clear-cut division regarding the future steps that need to be taken.

     

    Risk Status

     

    risk_status

     

    It is easy to track the status of the risk within nTask application. The preset risk statuses are:

    • Identified
    • In-Review
    • Agreed
    • Rejected

     

    Learn the risk management steps: 

    9 Risk Management Steps You Need for Your Project

     

    Risk Efficiency Measurement

     

    Risk Audit

     

    Risk Audit - Risk Assessment Matrix

     

    This audit is an independent measurement of the risks with recommendations to increase the effectiveness of risk management being performed in the company. This audit evaluates:

    • Exhaustiveness and granularity of risks being identified by the experts in the company
    • How good are we at identifying risk that is being discovered in the company?
    • Linkage of project risks to organizational risks
    • Effectiveness of mitigation or contingency plan put into action by the company

     

    This audit is generally performed by the independent technical experts from the market that are the judges of the way, the risk management principles are being applied in a certain company. The key elements of this audit are:

    • Identify areas of importance for risk analysis for a project
    • Potential additional risks identified based on the review
    • Customized checklist to evaluate the risks of a project
    • Risk radar – risk-prone areas of the product group
    • Top 10 risks in the organization from key projects, which requires management attention

     

    Risk Metrics

     

    The most important risk analysis is done by monitoring the risk metrics throughout the project closure procedure. All of the details that we receive from this review are the lessons learned which we can use in the future to tackle many problems related to risk:

    • Number of risks that occurred during the project closure
    • Number of risks that were identified during the project closure
    • Was the impact of the risks as severe as originally thought or was it a minor risk that could have been ignored from the start of the project?
    • How many risks recurred during the entire lifetime of the project?
    • How do the actual problems and issues faced in a project differ from the anticipated risks that the project might have experienced in its lifetime?

     

    Risk Matrix for Risk Management

     

    You might have heard of the quote, ‘The greater the risk, the greater is the potential reward’. If you don’t take any risk to step out of your comfort zone, you’ll never improve your current position.

     

    But that doesn’t mean there is no need for proper risk management. Without it, you can possibly create havoc in your organization and can be met with some unforeseen circumstances whose control will not be in your hands. This can be tackled perfectly with Risk Assessment Matrix.

     

    Utilizing risk matrix for risk management will not only reduce the likelihood of the risk but will reduce the magnitude of its impact on operations as well. It provides timely data that quantify the threats and greatly facilitates the organization to take some coherent steps for decreasing the potential chaos that might occur in case of ambiguity.

     

    The numerical values in the risk matrix provide a powerful way to depict the company’s exposure to risks and how much effort is needed to minimize them. They make the entire situation clear by making use of each division inside the matrix and give insights regarding the future approaches that need to be adopted.

     

    Do Risks Keep You Up at Night?

     

    As a project manager, do you contemplate handling risks and their eventual impact on a project timeline? If so, it is best to create a risk assessment matrix and incorporate it within a project management software at your company.

     

    Having a clear vision of the risks in any company is a life-changing experience. You can’t turn a blind eye toward them. Some project managers procrastinate and try to handle risks the old fashion way – i.e. according to the ‘Just do it’ management principle. Things have changed these days and it is better to adapt to new strategies instead of sticking with the old ones.

     

    Things have changed these days and it is better to adapt to new strategies instead of sticking with the old ones.

     

    Besides, we have matrices for everything, don’t we?

     

    A risk assessment matrix, or simply a risk matrix, may change the way these old-fashioned managers get things done. Technology does bring change in people.

     

    Look at your parents or grandparents for that matter. A decade ago, they were against the excessive use of computers. And now, they cannot spend an hour without their smartphones.

     

    Therefore, if you are one of those guys or you happen to someone reluctant to give up the old methods, a little tech always helps.

     

    Everyone loves keeping things in control and they fear what they don’t know.

     

    If managers can somehow understand the concept of risk assessment and how to minimize it, they will do it with more interest. The reason behind this is that it is quite an accomplishment to save the company from potential risks. Makes you feel like a hero.

     

    You will be better equipped to face it

     

    Let’s get one thing straight; the risk is pretty much inevitable.

     

    However, it is not something that you can’t alleviate. You can use any method you deem fit. But know this; intuition and gut feeling does not work every time.

     

    That is why ad hoc methods are a thing of the past. The best kind of planning is pre-planning. Using a risk matrix will increase your chances of minimizing, if not completely avoiding, various types of risks.

     

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    Summing It All Up

     

    The risk assessment matrix comes with plenty of benefits. However, those “benefits” scale according to the software feature, the way your team lead is using the RA model, and the company requirements.

     

    Regardless, these matrices are a great way of strategizing stuff and getting things done fast.

    1. Risk assessment matrix is a simple methodology.
    2. Perfect for highlighting and rating risk severity.
    3. Risk assessment matrices are flexible and offer several systematic approaches to problem-solving.
    4. ISO 31000 certified methodology.

     

    Moving over to the actual implementation part, Risk Assessment matrix methodology “CAN” turn out to be a gamble. However, if you are a top tier project manager, you’d want to even the odds, instead of fearing for the worst.

     

    When you are labeling your Axis, keep in mind that they should be labeled as ‘Likelihood’ and ‘Consequences.’ The reason behind this logic is that ‘Likelihood’ is a subjective term as compared to the conventional: ‘Frequency’ term.

     

    In addition, when you are in the middle of deriving numeric values for each cell in the matrix, there is a very real possibility for these values to be inaccurate. So, always double-check while you are doing the math. The best way of handling this predicament is by numbering the rows and columns of your risk assessment matrix differently.

     

    Overall, this methodology is simple, fast, and reliable. If you are a project manager who wishes to get by with minimum risk or a risk-free workflow, you should try to incorporate a risk assessment matrix in the process.

     

    It’s important to understand that a risk matrix is only a tool, not a complete solution for your needs. It all comes down to the intellectual worth of the people interpreting the matrix’s results. Alternatively, you can use a risk management tool to help you identify and assess the likelihood and probability of risks of your projects.

     

    A carefully sorted out strategy for risk mitigation always comes in handy in case of unforeseeable events and is a great means to equip the team with an effective contingency plan.

     

    The essence of the story? Risk Management should be a mandatory requirement whenever a new project planning is being done for staying as informed about the risks as possible.

     

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