Risk Matrix - Revision history

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 === See Also ===
 <div style="column-count:2;-moz-column-count:3;-webkit-column-count:3">
-[[IT Governance]]<br />
+*[[IT Governance]]
-[[IT Governance Framework]]<br />
+*[[IT Governance Framework]]
-[[Operational Risk Management (ORM)]]<br />
+*[[Operational Risk Management (ORM)]]
-[[IT Operations (Information Technology Operations)]]<br />
+*[[IT Operations (Information Technology Operations)|IT Operations]]
-[[Business Operations]]<br />
+*[[Business Operations]]
-[[Business Strategy]]<br />
+*[[Business Strategy]]
-[[IT Strategy (Information Technology Strategy)]]<br />
+*[[IT Strategy (Information Technology Strategy)|IT Strategy]]
-[[Enterprise Architecture]]<br />
+*[[Enterprise Architecture]]
-[[IT Sourcing (Information Technology Sourcing)]]<br />
+*[[IT Sourcing (Information Technology Sourcing)|IT Sourcing]]
-[[Operational Efficiency]]<br />
+*[[Operational Efficiency]]
-[[Risk]]<br />
+*[[Risk]]
-[[Key Risk Indicator (KRI)]]</br />
+*[[Key Risk Indicator (KRI)]]</br />
-[[Governance, Risk And Compliance (GRC)]]<br />
+*[[Governance, Risk And Compliance (GRC)]]
-[[Risk-Adjusted Return]]<br />
+*[[Risk-Adjusted Return]]
-[[Risk-Adjusted Return on Capital (RAROC)]]<br />
+*[[Risk-Adjusted Return on Capital (RAROC)|RAROC]]
-[[Risk Analysis]]<br />
+*[[Risk Analysis]]
-[[Risk Assessment]]<br />
+*[[Risk Assessment]]
-[[Risk Assessment Framework (RAF)]]<br />
+*[[Risk Assessment Framework (RAF)]]
-[[Risk Based Testing]]<br />
+*[[Risk Based Testing]]
-[[Risk Communication]]<br />
+*[[Risk Communication]]
-[[Risk Governance]]<br />
+*[[Risk Governance]]
-[[Risk IT Framework]]<br />
+*[[Risk IT Framework]]
-[[Risk Management]]<br />
+*[[Risk Management]]
-[[Risk Management Framework (RMF)]]<br />
+*[[Risk Management Framework (RMF)|Risk Management Framework]]
-[[Risk Matrix]]<br />
+*[[Risk Matrix]]
-[[Risk Maturity]]<br />
+*[[Risk Maturity]]
-[[Risk Maturity Model (RMM)]]<br />
+*[[Risk Maturity Model (RMM)]]
-[[Risk Mitigation]]<br />
+*[[Risk Mitigation]]
-[[Risks Analysis]]<br />
+*[[Risks Analysis]]
-[[Riskware]]<br />
+*[[Riskware]]
-[[Architectural Risk]]<br />
+*[[Architectural Risk]]
-[[Enterprise Risk Management (ERM)]]<br />
+*[[Enterprise Risk Management (ERM)]]
-[[Federal Risk and Authorization Program (FedRAMP)]]<br />
+*[[Federal Risk and Authorization Program (FedRAMP)|FedRAMP]]
-[[Chief Risk Officer (CRO)]]<br />
+*[[Chief Risk Officer (CRO)]]
-[[Chief Information Officer (CIO)]]]]<br />
+*[[Chief Information Officer (CIO)|CIO]]
-[[Value Risk Matrix (VRM)]]<br />
+*[[Value Risk Matrix (VRM)]]
-[[Value at Risk]]<br />
+*[[Value at Risk]]
-[[Total Cost of Risk (TCoR)]]<br />
+*[[Total Cost of Risk (TCoR)]]
-[[Cox's Risk Matrix Theorem]]<br />
+*[[Cox's Risk Matrix Theorem]]
-[[Credit Risk]]<br />
+*[[Credit Risk]]
-[[E-Governance]]<br />
+*[[E-Governance]]
-[[Data Governance]]<br />
+*[[Data Governance]]
-[[Social Media Governance]]<br />
+*[[Social Media Governance]]
-[[Information Security Governance]]<br />
+*[[Information Security Governance]]
-[[Information Governance (IG)]]<br />
+*[[Information Governance (IG)]]
-[[Corporate Governance]]<br />
+*[[Corporate Governance]]
-[[Policy Governance]]<br />
+*[[Policy Governance]]
-[[Enterprise Architecture Governance]]<br />
+*[[Enterprise Architecture Governance]]
-[[Governance]]<br />
+*[[Governance]]
-[[Information Governance Initiative (IGI)]]<br />
+*[[Information Governance Initiative (IGI)]]
-[[Information Governance Reference Model (IGRM)]]<br />
+*[[Information Governance Reference Model (IGRM)]]
-[[Simulation Governance]]<br />
+*[[Simulation Governance]]
-[[Calder-Moir IT Governance Framework]]<br />
+*[[Calder-Moir IT Governance Framework|Calder-Moir Framework]]
 </div>

← Older revision		Revision as of 22:13, 25 April 2022
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−	A '''risk matrix''' visualizes risks together with the possible extent of damage and their likelihood of occurring. The Risk Matrix, also known as the Probability Matrix or [[Impact]] Matrix, is an effective tool that assists in [[Risk Assessment\|risk evaluation]] by considering the [[Probability Theory\|probability]] or likelihood against severity linked with the potential [[Risk\|risks]] of a project. It is a tool that assists in reducing the risk impact that might otherwise affect a [[Business\|business]] adversely.<ref>~~Definition - What is a Risk Martix~~ [https://cioindex.com/index/risk-assessment-matrix/ ~~CIO Index~~]</ref>	+	A '''risk matrix''' visualizes risks together with the possible extent of damage and their likelihood of occurring. The Risk Matrix, also known as the Probability Matrix or [[Impact]] Matrix, is an effective tool that assists in [[Risk Assessment\|risk evaluation]] by considering the [[Probability Theory\|probability]] or likelihood against severity linked with the potential [[Risk\|risks]] of a project. It is a tool that assists in reducing the risk impact that might otherwise affect a [[Business\|business]] adversely.<ref>[https://cioindex.com/index/risk-assessment-matrix/ What is a Risk Assessment Matrix?]</ref>

	There are two dimensions to a risk matrix. It looks at how severe and likely an unwanted event is. These two dimensions create a matrix. The combination of probability and severity will give any event a place on a risk matrix.		There are two dimensions to a risk matrix. It looks at how severe and likely an unwanted event is. These two dimensions create a matrix. The combination of probability and severity will give any event a place on a risk matrix.

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-A '''risk matrix''' visualizes risks together with the possible extent of damage and their likelihood of occurring. The Risk Matrix, also known as the Probability Matrix or Impact Matrix, is an effective tool that assists in [[Risk Assessment|risk evaluation]] by considering the [[Probability Theory|probability]] or likelihood against severity linked with the potential [[Risk|risks]] of a project. It is a tool that assists in reducing the risk impact that might otherwise affect a [[Business|business]] adversely.<ref>Definition - What is a Risk Martix [https://cioindex.com/index/risk-assessment-matrix/ CIO Index]</ref>
+A '''risk matrix''' visualizes risks together with the possible extent of damage and their likelihood of occurring. The Risk Matrix, also known as the Probability Matrix or [[Impact]] Matrix, is an effective tool that assists in [[Risk Assessment|risk evaluation]] by considering the [[Probability Theory|probability]] or likelihood against severity linked with the potential [[Risk|risks]] of a project. It is a tool that assists in reducing the risk impact that might otherwise affect a [[Business|business]] adversely.<ref>Definition - What is a Risk Martix [https://cioindex.com/index/risk-assessment-matrix/ CIO Index]</ref>
 There are two dimensions to a risk matrix. It looks at how severe and likely an unwanted event is. These two dimensions create a matrix. The combination of probability and severity will give any event a place on a risk matrix.
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 Despite the fact that a risk matrix only contains two variables, there is a surprising amount of confusion or misunderstanding about how to use it. There are differing opinions about how to use it – some of these opinions are better than others.
-*Probability in Risk Matrix: Risk matrix probability is used in different ways depending on how the organization defines “probability.” Probability usually means likelihood or frequency, and is ranges from “very rare in industry” to “reported several times a year in company.” Probably can be used to quantify:
+*Probability in Risk Matrix: Risk matrix probability is used in different ways depending on how the [[organization]] defines “probability.” Probability usually means likelihood or frequency, and is ranges from “very rare in industry” to “reported several times a year in company.” Probably can be used to quantify:
 **The likelihood of a risk event, such as a runway incursion;
 **The likelihood of negative consequences materializing, such as aircraft damage from bird strike; or
 **An overall probability of a risk scenario, including the likelihood of a risk event and negative consequences materializing.
-Many companies understand probability as likelihood of consequences, though you can also use it to assess probability of risk events. Likelihood is assigned a letter value for each increment in likelihood. Low probability is assigned A. High likelihood (in a 5x5 grid) is assigned an E.
+Many companies understand probability as likelihood of consequences, though you can also use it to assess probability of risk events. Likelihood is assigned a letter [[value]] for each increment in likelihood. Low probability is assigned A. High likelihood (in a 5x5 grid) is assigned an E.
 *Severity in Risk Matrix: Severity in risk matrices is more streamlined in use than probability. Severity consists of:
 **The severity of impacts in safety events; and
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 Severity is given in a range of numbers, starting at 1 (low severity), and incrementing up by 1 each row. In a 5x5 risk matrix grid, high severity would be assigned a value of 5.
 Severity is generally considered as ranging from:
-*Negligible (1 rating): slight injury/damage, low financial consequences, and/or little effect on mission; to
+*Negligible (1 rating): slight injury/damage, low financial consequences, and/or little effect on [[mission]]; to
 *Catastrophic (5 rating): multiple fatality, extremely high financial consequences, and/or mission failure
 High severity risk assessments should require extensive investigations by a company and every available resource to mitigate the exposure of the safety incident.
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 '''Creating a Risk Matrix<ref>How do you create a risk matrix? [https://www.microtool.de/en/knowledge-base/what-is-a-risk-matrix/ Microtool]</ref>'''<br />
-To create a risk matrix or a risk diagram, the probability of occurrence and the extent of the damage have to be evaluated. Then the individual risks are entered into a coordinate system according to these values.
+To create a risk matrix or a risk diagram, the probability of occurrence and the extent of the damage have to be evaluated. Then the individual risks are entered into a coordinate [[system]] according to these values.
-*Evaluation of the likelihood of occurrence: There are five levels of entering the likelihood of occurrence. These levels can be expressed in percentages or in semantic concepts. For example:
+*[[Evaluation]] of the likelihood of occurrence: There are five levels of entering the likelihood of occurrence. These levels can be expressed in percentages or in semantic concepts. For example:
 **0-20%, 21-40%, 41-60%, 61-80% and 81-100%
 **impossible, unlikely, possible, likely and highly likely
-The criteria for the level of likelihood where a risk is situated has to be defined precisely. If you have quantative data, then you can base it on that. Even the reference value should be clearly defined. For example, take the expected time until the onset of the damage or the likelihood per customer. An “impossible” likelihood level is recommended so as to not have to identify the same risks again during a project, for example, if the process changes.
+The criteria for the level of likelihood where a risk is situated has to be defined precisely. If you have quantative [[data]], then you can base it on that. Even the reference value should be clearly defined. For example, take the expected time until the onset of the damage or the likelihood per [[customer]]. An “impossible” likelihood level is recommended so as to not have to identify the same risks again during a project, for example, if the [[process]] changes.
 *Evaluation of the extent of damages: In the same way, the extent of damages can be formulated in five levels, for example, low, middle, high, very high and critical.
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 *Detailed descriptions of all consequences within the range.
 *It uses orders of magnitudes and has consistent likelihood range to cover entire spectrum of potential hazards.
-*Good guidance for effective hazard analysis in a qualitative manner and may not require prior knowledge for quantitative analysis. However, proper knowledge of the project for which it is done is an advantage. It shall also provide guideline additional action needed to mitigate risks with intolerable risk level, that is, to show how intolerable [[Risk Mitigation|risk levels can be mitigated]], to bring the same with tolerable range.
+*Good guidance for effective hazard analysis in a qualitative manner and may not require prior knowledge for quantitative analysis. However, proper knowledge of the project for which it is done is an advantage. It shall also provide [[guideline]] additional action needed to mitigate risks with intolerable risk level, that is, to show how intolerable [[Risk Mitigation|risk levels can be mitigated]], to bring the same with tolerable range.
 *It shall be designed in such a way that it has flexibility to adapt itself for various risk targets specific for the company project.
-*Prior software knowledge is not essential, but it could be handled with the help of [[Software|software]].
+*Prior [[software]] knowledge is not essential, but it could be handled with the help of [[Software|software]].
@@ Line 67: / Line 67: @@
 *Presents the risk situation visually and comprehensively.
 *Presents the risk situation simply for everyone because no prior knowledge is required to understand it.
-*Assesses the efficiency of your risk measures.
+*Assesses the [[efficiency]] of your risk measures.
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 *Suboptimal resource allocation. Effective allocation of resources to risk-reducing countermeasures cannot be based on the categories provided by risk matrices.
 *Ambiguous inputs and outputs. Categorizations of severity cannot be made objectively for uncertain consequences. Inputs to risk matrices (e.g., frequency and severity categorizations) and resulting outputs (i.e., risk ratings) require subjective interpretation, and different users may obtain opposite ratings of the same quantitative risks. These limitations suggest that risk matrices should be used with caution, and only with careful explanations of embedded judgments.
-Thomas, Bratvold, and Bickel demonstrate that risk matrices produce arbitrary risk rankings. Rankings depend upon the design of the risk matrix itself, such as how large the bins are and whether or not one uses an increasing or decreasing scale. In other words, changing the scale can change the answer.
+Thomas, Bratvold, and Bickel demonstrate that risk matrices produce arbitrary risk rankings. Rankings depend upon the [[design]] of the risk matrix itself, such as how large the bins are and whether or not one uses an increasing or decreasing scale. In other words, changing the scale can change the answer.
 Douglas W. Hubbard and Richard Seiersen take the general research from Cox, Thomas, Bratvold, and Bickel, and provide specific discussion in the realm of [[Cyber Security|cybersecurity]] risk. They point out that since 61% of cyber security professionals use some form of risk matrix, this can be a serious problem. Hubbard and Seiersen consider these problems in the context of other measured human errors and conclude that "The errors of the experts are simply further exacerbated by the additional errors introduced by the scales and matrices themselves. We agree with the solution proposed by Thomas et al. There is no need for cybersecurity (or other areas of risk analysis that also use risk matrices) to reinvent well-established quantitative methods used in many equally complex problems."

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 [[Calder-Moir IT Governance Framework]]<br />
 </div>
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 *Why the risk matrix must die [https://www.e-accent.com/articles/2017/why-the-risk-matrix-must-die-html/ Jorn Mineur]
 *Levels of a Risk Matrix [https://www.industrysafe.com/blog/levels-of-a-risk-matrix Vector Solutions]

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 </div>
 ===References ===
 <references/>

← Older revision		Revision as of 21:16, 18 March 2020
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	*It shall be designed in such a way that it has flexibility to adapt itself for various risk targets specific for the company project.		*It shall be designed in such a way that it has flexibility to adapt itself for various risk targets specific for the company project.
	*Prior software knowledge is not essential, but it could be handled with the help of [[Software\|software]].		*Prior software knowledge is not essential, but it could be handled with the help of [[Software\|software]].
		+
		+
		+	'''Advantages of the Risk Matrix<ref>Advantages of the Risk Matrix [https://www.microtool.de/en/knowledge-base/what-is-a-risk-matrix/ microtool.de]</ref>'''<br />
		+	The risk matrix:
		+	*Identifies the gravest project risks.
		+	*Creates and presents the risk situation with minimal effort (e.g. as an Excel diagram).
		+	*Presents the risk situation visually and comprehensively.
		+	*Presents the risk situation simply for everyone because no prior knowledge is required to understand it.
		+	*Assesses the efficiency of your risk measures.

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 The reference value is then established (for example, Euros per occurence.)
 '''Features of Risk Matrix<ref>Features of Risk Matrix [https://www.sciencedirect.com/science/article/pii/B9780128037638000017 Swapan Basu]</ref>'''<br />
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 *Detailed descriptions of all consequences within the range.
 *It uses orders of magnitudes and has consistent likelihood range to cover entire spectrum of potential hazards.
-*Good guidance for effective hazard analysis in a qualitative manner and may not require prior knowledge for quantitative analysis. However, proper knowledge of the project for which it is done is an advantage. It shall also provide guideline additional action needed to mitigate risks with intolerable risk level, that is, to show how intolerable risk levels can be mitigated, to bring the same with tolerable range.
+*Good guidance for effective hazard analysis in a qualitative manner and may not require prior knowledge for quantitative analysis. However, proper knowledge of the project for which it is done is an advantage. It shall also provide guideline additional action needed to mitigate risks with intolerable risk level, that is, to show how intolerable [[Risk Mitigation|risk levels can be mitigated]], to bring the same with tolerable range.
 *It shall be designed in such a way that it has flexibility to adapt itself for various risk targets specific for the company project.
-*Prior software knowledge is not essential, but it could be handled with the help of software.
+*Prior software knowledge is not essential, but it could be handled with the help of [[Software|software]].

← Older revision		Revision as of 20:54, 18 March 2020
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	[[File:Risk_Matrix.png\|400px\|Risk Matrix]]<br />		[[File:Risk_Matrix.png\|400px\|Risk Matrix]]<br />
		+	source: [https://www.cgerisk.com/knowledgebase/Risk_matrices CGE Academy]


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	The reference value is then established (for example, Euros per occurence.)		The reference value is then established (for example, Euros per occurence.)
		+
		+	Features of Risk Matrix
		+	A good risk matrix normally shows the following features:
		+	*Normally, quantitative/semi-quantitative hazard analysis tool.
		+	*Developed in a simple and easy to understand manner.
		+	*Tolerable and non-tolerable ranges are clearly defined prior to developing risk matrix.
		+	*Detailed descriptions of all consequences within the range.
		+	*It uses orders of magnitudes and has consistent likelihood range to cover entire spectrum of potential hazards.
		+	*Good guidance for effective hazard analysis in a qualitative manner and may not require prior knowledge for quantitative analysis. However, proper knowledge of the project for which it is done is an advantage. It shall also provide guideline additional action needed to mitigate risks with intolerable risk level, that is, to show how intolerable risk levels can be mitigated, to bring the same with tolerable range.
		+	*It shall be designed in such a way that it has flexibility to adapt itself for various risk targets specific for the company project.
		+	*Prior software knowledge is not essential, but it could be handled with the help of software.