The risk matrix is a special system that allows with a fairly large share of truthfulness to determine the likelihood of risks at the enterprise in a particular area of its activity. It is very useful when planning, considering potentially profitable projects and the like of any organization’s work items. In order to understand as accurately as possible all the features of this tool, it is necessary to understand the entire planning system, how it is implemented, why it is needed, what it focuses on and how it acts in certain circumstances. Understanding only one of these elements will not be able to give a complete picture, since it is in this case that it is important to collect all the information and generalize it into a single form. Only she will be able to show the situation most realistically in the context of certain events, situations, incidents and the like.
What is project risk
Project risk is an event that could theoretically occur. In the vast majority of cases, it will lead to certain problems in the enterprise. For example, the delivery time of goods may not be fulfilled, its value may increase, the lot will disappear, the money paid will depreciate and so on. The risk profile includes a list of elements that are important for further analysis. Each of them has a clear source or cause of occurrence. In addition, they have certain consequences, in some cases especially critical, in other situations not very significant. As a rule, all such situations are considered repeatedly throughout the implementation of a project. It must be borne in mind that there is a possibility that the occurrence of risks will be absolutely impossible to predict. The simplest example of this can be considered the sudden outbreak of hostilities, terrorist attacks and so on. Naturally, it is impossible to predict them, therefore, if at least the slightest likelihood of such exists, many companies automatically put a certain amount in the reserve. This helps to respond to non-standard conditions more adequately and with minimal losses, which in the end will be beneficial for one side of the agreements and the other.
What is a risk matrix
It is also called a risk map, since it looks like a grid on which there is certain information about all the probable problems. They can both exist at the time of compilation, and be predictable. The risk matrix is divided into three main categories: levels, probabilities and consequences. Each of these items will be described in more detail below. This tool for assessing potential problems in many companies is the main source of information that is taken into account when considering the possibility of implementing a project. As a rule, based on everything indicated in the matrix card, the management has the opportunity to issue the most effective and reasonable solution that can arrange both sides of the contract. That is, the company employees responsible for this tool are obliged to treat their own work as responsibly as possible, because their data will affect the entire development of the enterprise, its income generation, and so on. At the same time, if some indicators are deliberately underestimated and an adverse event leads to significant losses, they will also be liable, provided that all this could really be predicted.
Separation of risks by levels
All problems have a certain level of risk. So, there are 4 main varieties: low, moderate, high and extreme. The very first type implies an almost complete absence of actions, especially if all the necessary instructions were given in advance. As a rule, it is enough to carry out the usual control check, making sure that the employees really understand the situation and know how to react to it. The second, moderate level is already more complicated. Usually, in order to cope with it, enough knowledge of the head of a particular unit. You must make sure that he understands the essence of the problem and is ready to bear responsibility in case of failure. This is enough to ensure that the situation is resolved in the best way without much effort. The emergence of high-level risks is indeed very important, and it is necessary to immediately attract the attention of senior management to the problem that has arisen. The bosses will be able to quickly agree among themselves and make the right decision, which can lead to minimization of losses. The very last, extreme level implies that you need to act right now, without any meetings, negotiations, or the like.
Probability sharing
The definition of risk is also carried out by the type of probability of its occurrence. Five types are distinguished: A, B, C, D, and E. Category E is a type of risk that is extremely rare. To do this, certain conditions must be met, and the chance of such is considered as the least likely. Group D refers to the types of situations that are unlikely to occur. That is, everything that is possible in theory is included here, but in practice it is extremely rare. The next category is C. These are already risks that are likely to arise, since this happens with some regularity that can be roughly defined. The penultimate group is B. It includes situations that occur more often than not. The calculation of category A risks is very simple. You can give almost a 100% chance that a problem will arise. In accordance with a certain frequency of occurrence, the company will be able to respond correctly, proactively eliminating possible problems or, if this is not possible, taking into account the consequences of their occurrence in advance.
Risk sharing by consequences
The risk and uncertainty of possible events should also be considered in terms of how critical they may be for the company. There are several basic categories of consequences, which, in turn, can be divided into three groups: health harm, cost and effort required.
Impact table:
|
Effects |
Harm to health |
Costs |
Efforts |
|
Catastrophic |
Dead |
Critical. There is no way to work further |
Critical Outside Help |
|
Significant |
Many affected |
Serious |
Serious outside help |
|
Medium |
Serious medical care |
High |
With outside help |
|
Small |
First aid |
Medium |
Independently |
|
Insignificant |
No |
Low |
Independently |
A detailed description is unnecessary here, since all the main things are clear from the table. We can only give a few examples. The most insignificant problems can be considered an accidental breakdown of equipment that is not too necessary, which can be quickly and cost-effectively replaced with another. There are no casualties here, the cost of the work is low and the staff can do everything that is needed with their own hands. But the most serious example, in which this risk profile reaches the “catastrophic” indicator, is a global man-made accident in which many employees and other persons who are not related to the company have died. Naturally, the costs in such a situation will be so incredible that it is likely to simply close.
Key Features
The risk matrix implies the preliminary and sequential implementation of a number of specific actions. The first thing that needs to be done is identification. That is, all probable risks must be listed and defined. The next step is hazard assessment. Under this item, previously selected probable problems are broken down according to the degree of their threat to the project, life, health and finances of the company. After this, you should clearly consider possible actions that can be aimed at minimizing harm. That is, if possible, make sure that the problem does not arise in principle. As an option - think over the reaction scheme that will need to be implemented if the situation does arise. The last and longest stage is implementation control. If actions are meant that reduce risk and uncertainty to zero or a minimum, then they need to be checked. If this is not possible, then it will be necessary to constantly or at key stages of the project implementation carry out additional checks. They will be able to timely identify emerging problems.
Planning
This process is the main one. It allows you to think through all possible options and probabilities in advance. There are no clearly established criteria for how the plan should be drawn up. Each employee chooses the best view for himself and works according to his own vision of the problem, provided that there is no need to correlate the work permits received with other people. About the same thing can be said about such an instrument as a risk matrix. An example of such a plan should include such elements as general information, company data, features and a description of the project under consideration, as well as those goals that were set. Next come the various sections that more accurately characterize the plan and its features. This includes methodology, organization, budget, regulation, reporting, monitoring, and so on.
Types of risks
All possible problems have several types of potential control. It is also important for the risk matrix to work successfully. The control calculation formula is quite simple, on the one hand, and on the other hand, extensive knowledge is required, often going beyond the information available to ordinary employees. So, risks are divided into those that cannot be controlled, it can be done partially or full control is available. The first category includes problems that are not related to the company in any way. The second group includes everything that also does not apply to the enterprise, as well as some elements related to it. The latter category includes technical, legal and other similar problems directly related to the company.
Factors
Among other things, all non-standard situations have certain factors due to which the risk profile becomes simpler and more understandable. Thanks to these elements, along with other other features and factors, planning the success of the project will be facilitated as much as possible.
Factor table:
|
Factors |
Description |
|
Macroeconomics |
Unstable economy |
|
State level regulatory measures |
|
|
Law |
Product Section |
|
Rule change |
|
|
Change in taxes |
|
|
Ecology |
Technological disaster |
|
Disaster |
|
|
Social |
Act of terrorism |
|
Strike |
|
|
Country |
Political instability |
|
Cultural or Religious Features |
|
|
Members |
Team problems |
|
Founders Problems |
|
|
Technics |
Forecasting Errors |
|
Crash |
|
|
Finance |
Unstable foreign exchange market |
|
Lack of funding |
Only the main elements that can be supplemented or changed are listed here, but their general essence will remain the same. As a rule, this is enough for a more or less detailed idea of at least a short list of likely risks. With these factors, you can begin to work.
Risk Analysis and Assessment
If you do not go into details, but consider the situation as a whole, you can see that there is nothing globally complicated in risk assessment and analysis. It is enough to pose a number of basic questions on a particular problem and immediately it will be possible to draw the appropriate conclusions. So, the analysis and calculation of risks should begin with whether it is possible to manage a single problem. If so, you need to develop a plan to minimize losses. If not, you need to understand how critical the risk is. If very, it is necessary to immediately respond and stop the implementation of the project. If not, you should simply notify the manual.
Response
It has already been said above about how you can roughly evaluate and analyze problems. Of course, the information for the most part is general in nature, but in more detail something can be considered only by being tied to a specific situation and company. After the problem is known, it requires a reaction, because the definition of risk is only the initial stage. So, after you have an understanding of the situation, you should find out what exactly caused its occurrence. Based on this, an approximate model of the dependence and influence of various factors on the problem should be drawn up. Within the framework of it, an understanding of how exactly what moment affects the final result is formed. Well, and this already makes it possible to roughly estimate what actions are necessary to change the initial indicators so that the probability of risk or its consequences are minimal.
