You can label these as low priority in your risk management plan. Low (1-6): Low-risk events likely won’t happen, and if they do, they won’t cause significant consequences for your project or company. The risk impact is both color-coded from green to red and rated on a one through 25 scale. When you place a risk in your matrix based on its likelihood and severity, you’ll find the level of risk impact. Very unlikely (1): It’s a long shot that this risk will occur. Not likely (2): There’s a good chance this risk won’t occur. Possible (3): This risk could happen, but it might not. Probable (4): There’s a good chance this risk will occur. Very likely (5): You can be pretty sure this risk will occur at some point in time. The scale of likelihood identifies the probability of each risk occurring. You’ll then identify your scale of likelihood, which you’ll place in the rows of your risk matrix template. Major (4): The consequences of this risk will be significant and may cause long-term damage.Ĭatastrophic (5): The consequences of this risk will be detrimental and may be hard to recover from.
Moderate (3): The consequences of the risk will take time to mitigate. Minor (2): The consequences of the risk will be easy to manage. Negligible (1): The risk will have little consequences if it occurs. In a five-by-five matrix, there are five levels in your scale of severity. The scale of severity measures how severe the consequences will be for each risk. When creating your risk matrix template, you’ll first identify your scale of severity, which you’ll place in the columns of your matrix. If your company sells a physical product, you may have to think about manufacturing risks. For example, if you have government clients, then you also want to brainstorm legal risks. There are other risk categories to consider depending on your work industry. Technical risk: Technical risk may include anything related to company technology, such as a security breach, power outage, loss of internet, or damage to property.Įxternal risk: External risks are out of your control, like floods, fires, natural disasters, or pandemics. Operational risk: Operational risks are process errors or procedural mistakes, like poor planning or a lack of communication among teams.įinancial risk: Financial risk can involve various events that cause a loss of company profit, including market changes, lawsuits, or competitors.
#Probability consequence matrix software#
Strategic risk: Strategic risks involve performance or decision errors, such as choosing the wrong vendor or software for a project. The risks you may face will likely fall into these categories: Types of risksĪs part of the process, you’ll need to brainstorm a list of risks to chart in your risk matrix. These ratings will help your team prioritize project risks and effectively manage them. Once you assess the likelihood and severity of each risk, you can chart them along the matrix to calculate risk impact ratings. What is a risk matrix in project management?Ī risk matrix is a risk analysis tool to assess risk likelihood and severity during the project planning process.
#Probability consequence matrix how to#
In this article, we’ll explain how to create a risk matrix template and offer helpful tools for turning your results into action. Once you assess the severity and likelihood of each risk, you’ll prioritize your risks and prepare for them accordingly. Without the help of a crystal ball, the only way to prevent project risks is to proactively prepare for them.Ī risk matrix helps you analyze risk by assigning each event as high, medium, or low impact on a scale of one through 25. Other times, you’ll feel like all the odds are against you. Sometimes, you'll get through an entire project without experiencing a single hiccup. Risks are a part of any project, and there’s no surefire way to know which ones will occur and when. In this piece, you’ll learn how to create a risk matrix template and how to use the information from this analysis tool to develop a comprehensive risk management plan. Once you map your risks, you can calculate overall impact and prioritize risks accordingly. A risk matrix analyzes project risks based on likelihood and severity.
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