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Risk management is a critical aspect of project management because risk is a part of everything we do. This is especially true in business where risk can impact the success of a project.
Therefore, it’s important to assess the severity of all potential risks before starting a project. The best way to approach project risk management is by using a project risk matrix template.
What is a risk matrix?
A risk matrix is a visual representation of the impact an event may have on your project. It provides a scale to measure the impact and its probability to determine whether an identified risk can be categorized as low risk, medium risk, or high risk.
Once potential risks are identified, they should each be assigned a risk score to classify the risk’s impact on the project, coupled with the probability of the risk occurring. All risks can then fit into a risk matrix like the one below.
How to assess project risk levels
As you assess potential project risks, you can assign them to a section of the matrix. For example, a server crash would have a high impact to the project but because it is unlikely to happen, it is low on the probability scale. Therefore, this risk would be assigned to the upper left quadrant for high impact, low probability.
It’s important to have an action plan in place for all risks, but the level of detail in the mitigation plan can vary based on the assessed risk. Risks in the high impact, high probably quadrant warrant thorough, detailed mitigation plans, while risks in the low impact, low probability quadrant require less detailed planning.
What are the main components of a risk assessment matrix?
The risk matrix is an easy way to break down the various kinds of risk during a project. It helps project managers create plans for risks based on the impact they may have on the outcome of the project.
It helps to have a solid understanding of the components in risk classification.
There are six different classifications of risk. They are:
Human - Examples of this risk factor are team members leaving the project, failing to perform tasks, or missing deadlines. Natural - These risks range from hurricanes to forest fires, and even to squirrels chewing on the power lines. These risks are hard to predict unless you live in an area prone to natural disasters. Operational - This kind of business risk includes things like your company going out of business, too many stakeholders on a project, or funding issues that impact the project. Procedural - A great example of procedural risks is failing to properly assess and classify the risk you may encounter in a project. Financial - This risk comes in the form of running over budget. Technical - This risk includes things like the SaaS tool used for project notes goes down, Slack has an outage, or your VPN goes offline.
Include a clear description of each risk with a title that describes the risk, a specific explanation of the risk, 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 the risk? Not every risk will come to fruition, which is why the risk matrix includes probability. Focus your energy on the high impact risks that are likely to happen.
How bad will the outcome be if the risk does occur? Assessing the severity of each risk helps you know how much effort should be allocated into planning for it. A risk with a low impact doesn’t need the same attention as a high impact risk.
The risk score (or risk rating) is a calculation based on how likely something is to happen multiplied by its potential impact. Assign a value to both the probability and the severity and multiply those numbers together. This gives you a number that can be used to determine how serious to take the risk.
A low risk score means less time is needed on a mitigation plan, while a high score means that it’s time to get planning and prepare for the worst.
What will the team do if it the worst happens? Craft a response plan for any high impact, high probability risk in the matrix. The more time spent analyzing and assessing risk, the more plans in place that will mitigate a crisis.
Remember to keep templates of the various response plans to be used for future projects.
Risk management timeline
Break down the response time needed from the moment the incident occurs to the time needed to 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.
Benefits of a risk matrix template
The risk matrix template makes it easy to quickly visualize a risk matrix for each potential risk. It’s a good way to practice 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
A risk matrix template gives 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, accurate assessment of all risks.
A 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 template is a helpful tool for fully understanding the risk you face and the effect it can have on your project. A risk matrix template gives you a way to carefully assess the risk and develop a comprehensive response plan.
👉 Get started with this risk matrix template.
After you copy this template, you can start using this free risk matrix template for project planning.
How to use this Risk Matrix Template?
Step 1: Identify & Add Risks
Starting with the page, add a new risk by clicking the Add New Risk button. In the form, add a Title, Description, the Project it is related to, the Probability of the risk occurring, and the Impact it will have. When a new risk is added to the risk matrix template, it will automatically be placed in the Matrix according to its Impact and Probability. The higher probability and greater impact causes the risk to become more Red, and the lower probability and lower impact causes it to become more Green. You can visualize your matrix by viewing it here .
Step 2: Visualize Risks by Impact & Probability
To see 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 Address Risk button to the risk.
Step 3: Projects and Teams
On the page of this risk matrix template, define the project’s goals and their target dates. By filling in the Projects and Description section on the table, you are defining projects and which teams are taking them on. You can add a new project by clicking the Add New Project button. The table also allows users of this template to see all teams and what each team is responsible for.
Step 4: Keep up with the Archive & Admin
The page allows for all team members to see archived Risks once they have been addressed by the respective teams. On the page, you are able to see tables that define Impact and Probability for the Risk Matrix. This is easy to customize for to your team’s needs.
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