Torc Thumbnail 3 Risk Matrix

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Risk Management Matrix

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Research has shown that more than half of all change management initiatives fail to yield the desired results. A Risk Management approach needs to be built into all CChange Management programmes so that risk is visible and contingency plans to respond to it can be drawn up.

Change Management and Risk


Developing a Risk Management Matrix for most change

initiatives can be conducted using a simple approach as follows:

Risk identification - what are the events and circumstances that could jeopardize the success of the change programme?

Risk analysis - what is the likelihood that each identified risk will occur and what will be the impact on our plans?

Risk prevention and control - how will we prevent and manage the identified risks?



Potential risks

Probability/Impact ratio

Controls/Risk Mitigation

P I PxI


The following template can be used in developing a risk management picture:



Probability

Certain 5

Likely 4

Possible 3

Unlikely 2

Rare 1

Impact

Catastrophic 5

Major 4

Moderate 3

Minor 2

Insignificant 1

When rating the likelihood and impact use simple measures


Using the Risk Management Matrix enter the rating for the probability (P) of the risk occurring in the ‘P’ column.

Record the rating of the impact (I) of the risk should it occur in column ‘I’ on the matrix.

To calculate the probability/impact ratio (PI), multiply the scores in each column (P x I) so you are combining the likelihood of the risk occurring with the consequence.


How to Develop the Matrix


The score is rated on a scale of 1 – 25 with 1 being the lowest probability/impact (PI) ratio and the highest PI ratio score possible is 25.

Identified potential risks should be analysed, with a tentative indication of the significance of each risk. Decisions can now be made as to how the risk will be managed based on the significance – can we prevent it, can we prepare a contingency plan, can we ignore it?



The following is a sample of a risk assessment for an organisation which is facing a major increase in business having just won a contract for new services.

Risk Management Matrix - Example



Potential risks

Probability/Impact ratio

Significance/Controls/Risk Mitigation

P I PxI H = High Risk M= Medium Risk

L= Low Risk

1. Service to existing clients may suffer resulting in loss of business

4 5 20 H Appoint separate manager and team to manage and deliver services to the new client. Commence weekly service level reporting across all business streams.

2. Key staff are working to capacity and will not be able to take on additional work

4 5 20 H Identify staff within the organisation who can be up-skilled quickly for working with this account.

3. Cash flow will be impacted as agreed payment terms are 90 days

5 2 10 M Current reserves strong however can organise facility with the bank

4. Technical know how of some staff may not be sufficient

3 4 12 M Majority of technical staff have knowledge. Commence training programme for other staff members.

5. IT systems storage capacity may be an issue

3 3 9 M Conduct review to determine needs and upgrade if required

6. Service not acceptable to new client 1 4 4 L To be managed as part of client management process. Do not anticipate difficulty due to rigorous pre qualification process.


As can be seen from the risk management exercise, items 1 and 2 can be categorised as High Risk. These risks will have to be managed very closely.

Items 3,4 and 5 can be categorised as Medium and plans can be put in place to ensure they are effectively managed and do not become high risk.

Item 6 can be categorised as Low Risk and will be monitored as part of the client management plan.


Torc Thumbnail 3 Risk Matrix

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