Furthermore, a simple Google search will provide a plethora of templates that can be used to quickly build a risk matrix for reporting purposes. Non-experts in the risk field can easily construct risk matrices using applications such as Microsoft Excel or PowerPoint. In most cases, it does not require an extensive career or a fancy degree in risk management to use a risk matrix for presenting on key risks to stakeholders. One of the main benefits of risk matrices is these visual tools are easy to use. Easy to Apply and Use by Non-Risk Experts Below we will take a closer look at a few benefits of risk matrices and the value they can add in the risk management process. There is a time and place for everything, this includes the use of risk matrices in decision-making scenarios. As risk professionals we should always be questioning the tools we use in our industry and assessing if they are truly helping our organizations make quality decisions with risk in mind and promoting intelligent risk-taking to help achieve strategic objectives, remain in compliance with industry-specific regulations, and build competitive advantages by exploiting opportunities when presented. I am sure this content will start some discussions on risk matrices and that is exactly what we should all want. This article will outline some of my thoughts on the benefits, limitations, and healthy alternatives to risk matrices currently out there. As a risk management professional, I do see value in risk matrices, but I am also fully aware of this tool’s limitations. Now before I continue with this article in no way will I only be bashing risk matrices in any sort of way. Although it was a cute visual, it lacked context from a quantitative and even qualitative standpoint. It dawned on me that this risk matrix was not worth the paper it would be printed on if presented to the board of this organization. With such limited information and objective data provided it was almost a ‘pin the tail on the donkey’ game even for a risk manager as myself. At this time the students were asking for feedback on where they should place each of the risks in terms of frequency and severity. The next question had the students place the four pure risks they had selected on to a risk matrix provided in the assignment. The students had to be creative and use their risk management knowledge learned in prior weeks to come up with the top risks related to this adverse event. As I assisted the students in their selection in each pure risk quadrant the data provided in the case study was limited. The risks were to be broken into four pure risk categories: property, liability, personnel, and net income (or business interruption). One question had the students describe the top risks facing the company in an extreme weather event (e.g. The professor had the students break into groups to answer questions specific to a case study on a Canadian power distribution company. This article which will dive into the benefits, limitations and some alternatives to risk matrices came to me recently while conducting a breakout session for an online MBA risk management course at Temple University I was assisting with. Once heralded as a sophisticated way to visually map risk pertinent to an organization’s revenue-producing activities or the overall industry in which they exist, these tools do have their drawbacks which should always be weighed when using risk matrices in decision-making processes. Risk matrices (or risk heat maps) have been in existent for some time and have become a contested topic in the risk management community in recent years.
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