Whether we like it or not, risk is a part of everything we do. This is especially true in business, where small amounts of risk can have huge consequences on the success of a project. That’s why risk management is a critical aspect of project management.
We’ve talked before about why it’s important to assess risk before starting a project (and even provided you with a
). For some people, however, the best way to approach project risk management is by using a project risk matrix.
What is a risk matrix?
A risk matrix is a visual representation of how much of an impact something will have on your project. It gives you a scale to measure both the impact and probability to determine whether an identified risk can be categorized as high, low, or medium risk. Often, once you’ve placed a potential situation on the matrix, you then assign it a risk score (using a scale like 1 to 10 or something similar ) to classify the risk and its impact on the project.
It looks something like this (below).
As you assess the potential project risks you may encounter during your project (both good and bad), you drop it into the matrix based on how likely it is to occur and what the risk impact is going to be. For example, your servers may crash during the course of a project, which would have a high impact. But if it’s incredibly unlikely to happen (say your server room has to burn down first), then it’s low on the probability scale. You’d likely drop that one in the upper left, for high impact, low probability. You should still have a plan in place for it, but you don’t have to put too much energy into worrying about it happening, although you still come up with a plan for mitigation.
The main components of a risk assessment matrix & how to define them
The risk matrix is an easy way to break down the various kinds of risk that you’ll potentially encounter during a project. It helps project managers come up with plans for all the risks based on the impact they may have on the outcome of the project. They’re not complicated things, which is very helpful, but it helps to have a solid understanding of all the components. Let’s dive a little deeper.
First up is the kind of risk you’re going to encounter. For this example, we’re going to break it down into six different classifications of risk. They are:
- This is the human element of your project. Examples of this would be team members leaving their job (or moving to a different project team), failing to do tasks correctly, or missing deadlines.
- Believe it or not, mother nature can have a negative effect on your projects. This could be anything from a hurricane to forest fires, to squirrels chewing on the power lines. These ones are hard to predict (unless you live in an area prone to natural disasters).
- Risk that comes from within your company itself. This kind of business risk includes things like your company going out of business (or the client going out of business), people changing roles within the organization, too many stakeholders, or funding issues that don’t necessarily lead to your company going out of business, but still impact the project.
- Procedural risk creeps into a project when your workflows and processes aren’t as efficient as they could be. A great example of this would be failing to properly assess and classify the risk you may encounter in a project or an incorrect project scope that affects deadlines and deliverables.
- Similar to operational, but not quite is a financial risk. This comes in the form of running over budget or poor financial planning to begin with.
- Technical risk is the potential for technical failure of any kind during the project. This could be things like the SaaS tool you’re using goes down (or out of business) to your printer having
paper jam while you’re trying to get work done.
Your risk needs a good, clear description of what it is and how it affects the project. Include a title that describes the risk, a specific explanation of the risk (like your printer jamming), the consequences if it happens, and what you will do to solve the risk. You can get away with referring to the risk by the title in the matrix itself, but you should have a full description ready, as well.
How likely is it to happen? Not every risk is something that is definitely going to happen. That’s why the risk matrix includes probability. You need to be able to focus your energy on the big risks that are very likely to happen. You’ll have a pretty good idea from past experience if something has a high probability, but there are also going to be issues (like a company that has been having financial difficulty) that can also influence the probability.
How bad will it be if the risk does occur? Will it be kind of annoying or something that shuts down the entire project. Assessing the severity of each kind of risk helps you know how seriously you need to take it. Something that has a low impact doesn’t need the same attention as high impact kinds of risk.
The risk score (or risk rating) is a calculation based on how likely something is to happen multiplied by its potential impact. Basically, as we mentioned above, you assign a value to both the probability scale and the severity scale and multiply those numbers together. This gives you a number that can be used to determine how serious you need to take the risk. A low risk score means you can relax a little. A high one, on the other hand, means it’s time to get planning and prepare for the worst.
What are you going to do if it happens? You should put together some kind of response plan for any possible risk you may encounter. That response could be as simple as doing nothing for low-impact risk to more complex plans for higher-impact risk. The more time you spend analyzing and assessing risk, the more plans you should have in place that can be used in all your projects, which means you can keep templates for the various solutions you need.
Risk management timeline
Break down your response from the moment you encounter the incident to the time you resolve it. Establishing a timeline in advance helps you understand how long an incident will impact the project and gives you a way to plan other tasks around the interruption.
👉 Get started with this risk matrix template.
After you copy this template, you can start utilizing this free risk matrix template for your projects and business.
How to use this Risk Matrix Template?
Step 1: Identifying & Adding Risks to a Matrix
Starting with the
page, you have the ability to add a new risk that may hurt your organization’s execution for a certain task or project by clicking the
Add New Risk
button. In the form that is opened up, you can add in a
it is related to, the
of the risk occurring, and the
it will have.
When a new risk is added, it will be placed in the Matrix according to its Impact and Probability. The higher probability and greater impact causes the risk to become more
, and the lower probability and lower impact causes it to become more
. You can visualize your matrix by viewing it here
Step 2: Visualizing Risks by Impact & Probability
To see a less holistic view of the risks that your organization is taking on across different projects, you can view the
table where you can
filter by Impact and Probability
to see which risks you need to address first. Once risks have been addressed and accounted for, you can click the
Step 3: Projects and Teams
page, you should define your organization’s goals and the dates for when you are planning to achieve them. By filling in the
section on the
table, you are defining your organization’s projects and which teams are taking them on. You can add a new project by clicking the
Add New Project
Along with that, the
table also allows users of this template to see which teams exist and what each team is responsible for.
Step 4: Keeping up with the Archive & Admin
In the final step of the template, the
page allows for all team members of the organization to see archived
once they have been addressed by the respective teams.
page, you are able to see tables that define
for the Risk Matrix, you are able to change this and cater to your organization’s needs.
Benefits of a risk matrix template
The risk matrix template helps you walk through the risk matrix for each potential risk you may encounter. It’s a good way to practice not necessarily risk control (because you can’t control risk), but proactive risk management. Because it’s a template, you can quickly walk through the steps and get the matrix filled in quickly.
Conduct an accurate risk analysis
Templates are great because they give you a clear path to follow during the risk analysis process. You’re following the same steps for each possible risk, meaning you’re getting a consistent, very accurate assessment of all risks. This helps with planning because you know your assessments were done according to the same standards.
Streamline risk management process
The more time you spend in project management, the more you appreciate how a good template can make everything easier. Risk management is no different. It’s not a step that you can afford to rush through, but a good risk assessment matrix template helps you get through the process faster and with fewer mistakes.
Come up with a solid risk response plan
A risk matrix is a helpful tool for fully understanding the risk you face and the effect it can have on your project. The more you understand the risk, the better your risk response plan is going to be. A risk matrix template gives you a way to carefully assess the risk and develop a comprehensive response plan.
Risk matrix template FAQs
What is the risk matrix method?
The risk matrix method is using a risk matrix as a part of your risk management process for your projects. With this method, you’re assessing the risk based on the severity of the impact and the likelihood of it happening. From there, you create a risk score based on where something sits in the matrix.
What is a risk matrix table?
A risk matrix table is a table used to assess risk. It breaks down the risk into probability and severity, with the various risks you may encounter being placed within the table accordingly. The risk matrix tables act as an easy visual representation of risk.
What is risk in project management?
Risk is anything that might happen during a project that affects the outcome. This could be a positive impact or a negative. Most of the time we focus on the negative risk, but risk isn’t always bad. Either way, it’s good to be aware of the risks that might come up and have plans in place to manage them (for better or worse).