A risk matrix is designed to help teams determine the levels of risk involved in a certain situation or process.
This visual tool is popular in the Life Sciences space, as well as in other sectors that focus on mitigating risk and taking corrective action.
What Is a Risk Matrix?
A risk matrix allows team members to understand the risks their organization faces. It depicts both the probability and the severity of different risks occurring in a clear, visual way.
Risk matrices are almost always depicted in table or grid format. Along the Y axis, the matrix shows the probability of a given risk. Along the X axis, the matrix depicts the severity of the risk (in terms of the consequences that may occur).
Each axis runs on a scale, moving from low to high.
Does this make sense? The level of risk can be calculated by multiplying the likelihood of the situation by the consequences of the outcome.
This means that if the risk ranks high in terms of both probability and consequence, it is very high. Conversely, if it ranks low on each axis, then the overall risk is low. Some risks, you may find, are high in likelihood but low in consequences—or vice versa.
A Color-Coded System
Risk matrices are meant to be simple. To make sure teams can easily interpret them, they are generally depicted using a color-coded system.
In the style of a traffic light, risks in a risk matrix may fall in a green, yellow, or red category.
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Green risks involve a lower level of risk that is usually more acceptable to the organization. Risk mitigation activities might not be necessary.
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Yellow risks feature a medium level of risk that will require corrective action to address the potential consequences.
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Red risks include a high level of risk. Here team members will need to develop clear and comprehensive risk mitigation and risk avoidance strategies.
The color-coded system helps organizations interpret the risks they face. Some organizations, like NASA, include a fourth color (orange) to depict a risk level between yellow and red. Different teams and companies have the option to create their own risk matrices, tailored to their unique needs.
Key Risk Matrix Terminology
Are you familiar with the different types of risk matrices?
You may have heard of risk assessment matrices, which are another way to refer to standard risk matrices. This phrasing is more prevalent when the matrix is officially used in an organization’s risk assessment process.
A 5x5 risk matrix, meanwhile, is a specific type of risk matrix. This matrix is a 5x5 grid with five cells along the X axis of the matrix and five cells along the Y axis. A 5x5 risk matrix is the most common type of matrix, though teams may also see 4x4 or 3x3 grids from time to time.
In a 5x5 risk matrix, the probability axis is typically divided into categories such as: certain, likely, possible, unlikely, and rare.
The consequence axis, meanwhile, may include categories such as: very low, low, medium, high, and catastrophic.
With a clear understanding of these levels of risk, the organization can address how best to implement a risk mitigation strategy.
How to Build a Risk Matrix
You probably understand what a risk matrix should look like at this point.
Take the following steps to create a risk matrix of your own:
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Identify and Define the Risks You Face.
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Here you’ll want to determine what, exactly, might be getting in the way of your organization reaching its goals. What could potentially cause problems for your company, teams, customers, or other stakeholders? This step should be specific and thorough. Make sure you’re not leaving anything out.
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Evaluate the Risks from the Previous Step.
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This is where you’ll start to leverage your risk matrix. By evaluating the probability and frequency of the risks defined above, and by assessing their severity, you can take the time to understand the impact of the risks you face. Be sure to determine whether the consequences would be minor or catastrophic.
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Enter the Risks into Your Risk Matrix.
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Now that you have a clear understanding of the risks you face, you can start to work them into your risk matrix. Determine how many cells you plan to include in your grid, and then input the risks you defined so that you can prioritize them. The more serious the risk, the higher the priority.
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Update the Risks as Needed.
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The process of developing a risk matrix doesn’t end once you input the risks you face. Risk management is an ongoing process, and the probability and severity of each risk may evolve over time. Update your risk matrix regularly to ensure it’s an accurate depiction of your organization’s needs.
With these key steps in your arsenal, you can make risk matrices an integral part of your company strategy. Just make sure you understand the pros and cons involved.
Risk Matrix Pros and Cons
Risk matrices bring a number of benefits to organizations in the Life Sciences space. They offer a clear depiction of the probability of a given risk occurring, allowing team members to prioritize risks as needed and take action accordingly.
However, they aren’t without their drawbacks.
Consider the following pros and cons:
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Benefits
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Risk matrices help to clarify complex situations. Companies can customize them as needed, using them to identify which risks are the highest priority at any given time. These matrices also simplify complex risk management processes and help team members process, evaluate, and share data.
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Drawbacks
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One of the main pitfalls of a risk matrix is that the categories might not be specific enough to allow teams to compare different levels of risk. Categorizing in general can be fairly subjective, which means the results might not be quite as a reliable as one might hope.
The key thing is to keep in mind how risks may evolve over time. Again, risk matrices should be updated regularly to ensure an accurate depiction of the circumstances at play. Aim to give your risk matrix the time and attention it deserves, and your organization should be in good shape.
Conclusion
A risk matrix is a simple tool from which many Life Sciences companies can benefit. While its simplicity makes the risk matrix easy to interpret, it also makes it more difficult for teams to understand the nuances at play. This means while understanding risk matrices—what they are and how they work—is critical, teams should absolutely focus on other risk mitigation strategies as well. A risk matrix can certainly be effective, but it’s no substitute for a detailed approach to risk assessment.
Do you want to know more about avoiding risky situations?
Check out Scilife's Risk Assessment solution.
