A risk assessment matrix is an important part of the risk management process. When managing risk, organizations must set objectives, catalog assets, define different risks, assess those risks, develop risk tolerance levels, and find ways to mitigate risks.
The risk matrix is a visual representation of the risk analysis. It maps the risks on a coordinate plane, where the likelihood that an event will occur is one axis and the impact of the event is the other.
A high risk is an event with a high probability of occurrence and will significantly disrupt the business. A low-risk event is not likely to occur and will have little impact if it does. In some cases, depending on the risk’s potential impact, an improbable event can still be considered high risk.
The risk matrix plots the highest level risks on one end, the lowest level on the other, and medium risks in the middle. The risk assessment matrix often color codes the risk levels as well (on a green-yellow-red scale, for example), to help with visualization and decision-making.
What Is the Goal of a Risk Assessment Matrix?
A risk assessment matrix helps security teams to visualize the risk likelihood versus risk impact of specific cyber threats. The matrix does so by answering the following questions:
- What threats can happen, and under what circumstances?
- What are the likely consequences of the threats?
- How likely are the possible consequences to occur?
- Is the risk being controlled effectively, or does it require further remedial action?
With this knowledge, you can easily identify specific types of risk, including their probability and severity, while maintaining a real-time view of the ever-evolving risk landscape.
Benefits of Creating a Risk Matrix
A risk assessment matrix is a great tool to keep in your company’s risk management arsenal for several reasons.
Facilitates effective risk mitigation
A risk assessment matrix highlights the most severe risks your company faces. Since not all risks are equal, this comprehensive overview can be particularly useful to prevent potential harm.
While it’s tempting to allocate your resources to all potential risks, certain operational risks — such as a natural disaster or reputational damage due to data breaches — will take precedence over others. Using a risk assessment matrix, security teams can color-code every risk to identify the most pressing threats, develop plans, and take risk mitigation measures.
Enables targeted strategizing for high-risk event management
The impact of cyber risks will vary. By using a risk assessment matrix, you can prioritize the most pressing threats and focus attention and resources on those with the biggest potential harm.
For example, a project might encounter a slowdown in delivery times due to a supply chain issue. This won’t necessarily be a big deal if you’ve anticipated potential slowdowns and built additional time into the overall project plan. On the other hand, sudden cost spikes could cause the entire project to become untenable. In that case, project managers need to develop precise cost-monitoring procedures to detect cost increases immediately.
Those are different risks and they need different responses. A risk matrix brings such details into the light.
Provides a real-time view into the risk landscape
A risk matrix helps you to see how risks are evolving in real time. This is especially useful for emergent risks, where their potential harm might not be fully clear. The risk matrix allows you to document the risk anyway and then develop internal controls to minimize the risk’s harm.
Plus, by examining early warning signs or trigger events, you can take the necessary corrective action to maintain business continuity in the highly dynamic and complex risk landscape.
How to Create Your Own Risk Assessment Matrix
Creating a risk matrix is easy when you have the right guidance. Follow these four steps to develop one for your business.
Step 1: Understand your risk landscape
You need a comprehensive understanding of the total risk landscape. To achieve this, hold a brainstorming session with your organization’s key stakeholders to get a wide variety of input and insights. This will serve as the foundation of your risk assessment matrix; the more diverse and deep the opinions, the better.
Start your brainstorming session by categorizing risks based on their association with:
- Failed business decisions (strategic risk)
- Breakdowns in internal processes/procedures (operational risk)
- Financial loss (financial risk)
- Issues beyond your control (external risk)
Begin with the highest-level risks related to your business’s functions, such as operations, then narrow down to specific processes within those functions, like supply chain management.
Step 2: Determine your risk criteria
Use the collected insights to determine your criteria to evaluate the identified risks. Your risk assessment metrics will have two fundamental themes:
- Likelihood, or the probability that the risk will occur
- Impact to indicate the risk severity level
It’s important to get a consensus on the risk criteria and to assure accurate measurements. Otherwise, you’ll find it challenging to calculate your risk matrix properly. Plus, this may compromise your decision-making concerning risk mitigation, undermining the success of your risk management efforts.
Step 3: Assess and calculate the risk rating
Next, evaluate the risks based on your risk criteria and provide a qualitative risk analysis using a predefined scale. Many organizations use a three-part scale which allows you to determine the severity of the risks based on the following categories:
- High risk
- Medium risk
- Low risk
Sometimes it can be more beneficial to use a more granular approach, where you expand the scale to a 1 to 5 rating. Not only does this provide you with more insight into the severity levels; it also helps you to allocate your resources more effectively.
Step 4: Prioritize risks
At this stage, you can compare the different levels of risk (high, medium, or low) to the risk criteria (likelihood and impact). Prioritize risks that pose the highest likelihood and impact, and build a plan to mitigate them.
Considering that the risk landscape is always evolving, you must update your risk assessment matrix periodically to reflect the changing risk environment. Emergent risks may otherwise go unnoticed or undetected, disrupting business objectives and continuity.
Monitor and Analyze Risk with Help from ZenRisk
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ZenRisk addresses enterprise risk management and cyber security risk by enabling security teams to monitor and analyze threats, vulnerabilities, and incidents. It also offers customizable heat maps, dashboards, and reports to communicate the current risk status and potential threats to security teams, keeping them informed about their risk posture and taking timely remedial actions.
Other useful features include customizable risk calculations to evaluate threats across systems, business divisions, and controls, as well as automated alerts and workflows to catch and remediate risks with real-time updates and expose compliance risks.
Get a demo to experience first-hand how RiskOptics can guide your organization to confidence in infosec risk and compliance.