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All project risks are not equal in their effect on a project. Project risks that have been identified are prioritized using qualitative techniques such as the Risk Matrix.
Risk Matrix and Qualitative Risk Analysis
Project risks are not equal in their effect on a project. Project risks that have been identified are prioritized using qualitative techniques such as the Risk Matrix.
When to use
Once project risks have been identified, they should be entered onto a matrix or qualitative assessment and prioritized for further action. As long as there are open risks on the project, a risk matrix should be used.
- Determine the size of the matrix – the most commonly used size is 3 X 3. But I have worked with 4 X 4, 5 X 5, and even a 5 X 10 that combined positive and negative risk in one matrix.
- Normally probability is set as the vertical axis. The scale is either low to high or it is set with probability values
- Normally project impact is set as the horizontal axis. The scale is either low to high or an impact in terms of money or time is set.
- For each risk, place it in the correct spot on the matrix based upon the probability that the risk will occur and the impact to the project if it does occur.
- I use recent relevant experience on similar projects to assess the probability. If it happened on each of the last five projects, the probability is high that it will occur again. If it hasn’t happened on any of the last five projects, the probability is low.
- I base the impact assessment on the current project plan. Assuming the risk occurs, what does it do to the plan and the ability to achieve the project objectives? Is it a minor irritant or does the plan already account for the risk – then the impact is low. Does it require a totally new approach and a project rebaseline – then the impact is high.
- Periodically update the risks as more information becomes available and as events occur within the project.
- If you implement risk mitigation or risk response action in the project, the risk will normally be repositioned in the matrix – either the probability is reduced or the impact is decreased.
- If you accept a challenge or change to project objectives (finish one month sooner) normally some risks will need to change position, either the probability increases or the impact increases.
- Based upon the location of the risk in the matrix, the risk often receives a colour code. Risk with high probability and high impact are red. Risks with low probability and impact receive a color code of green. Risks in the middle receive a colour code of yellow.
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