Research shows that over 60% of projects are late, over budget, or fail to deliver to specifications. Furthermore, we know that risks can impact the scope, budget, timeline, and resources of a project. Here, we will review how to identify and assess potential project threats and how a Risk Assessment Matrix is a necessary tool that should be used to achieve the best outcome for your projects.
Although we cannot foresee every threat to a project, if we implement established and efficient risk management methods, such as a Risk Assessment Matrix, to evaluate the potential damage or interruption caused by those risks, we have the power to lessen the downstream impact of the risks identified. Thus, the overall project success rate is likely to improve.
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Table of Contents
- What Is a Risk Assessment Matrix?
- How to Create a Risk Assessment Matrix
- Risk Assessment Matrix Templates
- Why It’s Important to Identify Risks
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What Is a Risk Assessment Matrix?
A Risk Assessment Matrix is a straightforward, easy-to-read visual medium that provides insight into project risks by categorizing them by their likelihood of occurrence and the severity of their impact. A Risk Assessment Matrix is used to:
- Identify potential risks while considering both internal and external factors
- Present complex information in a simplified format to make it easier to assess issues and drive decision making
- Prioritize project actions and assist in strategic planning
- Provide project members and stakeholders with a snapshot of factors with the potential to affect project outcome
Read more on TechnologyAdvice: The Most Innovative Project Management Strategies
How to Create a Risk Assessment Matrix
1. Isolate all potential issues that threaten project progress
First, you should identify all internal and external factors that have the potential to seep into the project and cause issues. This may include resource availability, financial factors, and scope creep — just to name a few.
Getting the entire project team and stakeholders together to brainstorm can be an effective way to ensure you are assessing all angles of impact and that there is due diligence in properly identifying all potential risks.
2. Assess and categorize each risk in terms of likelihood and severity
Once you have listed all project risks, you’ll want to add these risks to the Risk Assessment Matrix. To do so, you must first define your risk criteria. In terms of severity, decide what you consider major or catastrophic versus what would be considered negligible. You will make the same assessment when defining how to scale the likelihood of a risk occurring.
Next, assign a numerical value to each identified risk. Generally, risks are assigned on a scale from one through five, with one being the least severe/frequent and five being the most extreme. Note that this can be very nuanced and should be tailored to your specific organizational needs, the industry in which you work, or the size of the project.
3. Prioritize and create a plan of attack
After you have created your Risk Assessment Matrix, the next step is to prioritize each risk and to begin putting a strategic plan in place. You should decide the sequence in which you plan to handle each risk, in accordance with their importance to your project and organization. These preemptive measures will help you get a grip on your project risks on the front end.
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Risk Assessment Matrix Templates
Check out these resources to help you get started on your Risk Assessment Matrix:
- Someka Risk Assessment Matrix Template
- Smartsheet Risk Assessment Matrix Template
- Team Gantt Risk Assessment Matrix Template
Why It’s Important to Identify Risks
Risks in project management are defined as unexpected issues that can occur throughout a project and have the potential to affect the project outcome. It’s a rare occurrence that a project is executed without running into a problem, big or small. As a project manager, it is your responsibility to identify potential risks and ways to manage and mitigate said risks.
For example, suppose that a supplier says the microchips you ordered no longer meet specifications due an updated government regulation. You now must find a new supplier. This could be considered a major risk that would have the potential to hinder your entire project.
Now, rewind to the start of the project and consider that during the planning stage, you took the time to analyze potential risks and identified there was a possibility for the government to update standards during the current year. Although the cost of the chips is more expensive than your first-choice supplier, you find a supplier that produces microchips that already meet the upcoming standards, so you decide to go with that supplier instead. Crisis averted!
The Project Management Institute (PMI) maintains that risk analysis and management are “a vital key to effective project management.” Because we live in a world of unpredictability, it is essential that today’s project managers have a comprehensive understanding of the risks their organization faces. Risk analysis is a crucial part of project management because it lessens the chance of unforeseen issues threatening to derail your project.
A Risk Assessment Matrix is a highly effective, yet easy way to tackle your project risks at the onset and increase the likelihood of your project being successful.
Read next: Types of Risk in Project Management
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