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4.21 Risk Analysis Matrix

Preface

As all projects involve the creation of a product, service, or result that is unique, in other words that has not been done or created before, they all involve a measure of uncertainty.  Risk is defined as an uncertain event or condition which, if it occurs, can have negative or positive consequences for a project.  Risk is thus present in any project.  Completion of a Project Risk Analysis and Management Matrix is required for all projects.

 

Inputs

Project Charter

Workplan

Stakeholder Analysis and Communication Planning Matrix

Risk Registers from previous similar projects

Analytical assistance from project team members and the project sponsor

Outputs

A Risk Analysis and Management Matrix

Rationale

The failure to anticipate and plan for uncertain events almost dooms even the most routine project from the outset.

Procedures

1.    Review the Charter and Workplan with team members and key stakeholders; ask them to identify those areas of the workplan where the work is less well understood or the results of the effort are more difficult to predict with confidence.  Consider, particularly

  • the flexibility of constraints;

  • the confidence behind key assumptions;

  • the experience of the project team and its members;

  • the current and required state of technological sophistication;

  • the presence and clarity of relevant quality standards;

  • the clarity and stability of the definition of project scope;

  • the security of the supply of key financial, material, and human resources; and

  • the stability of the external project environment including economic and political conditions.

Do not neglect positive risk, that is uncertain events or conditions that can have positive consequences for the project.

2.    Enter identified areas of uncertainty in the “Description” column of the matrix, noting the risk category (risk can be technical/performance, project management, organizational, or external/environmental) in the “Risk Category” column.

3.    Determine how the team will become aware that an uncertain event or condition is beginning to emerge (the first indicator one would notice that things were developing other than as they had been planned) and enter this information in the “Evidence” column of the matrix.

4.    Estimate the impact on the project if the identified uncertain event or condition materializes (the consequences, especially for project scope, time, and cost if the described risk event takes place), enter this information in the “Impact” column of the matrix.

5.    Estimate the likelihood of the identified uncertain event or condition materializing.  Enter either a qualitative (low – high) or quantitative (1-5) assessment in the “Likelihood” column of the matrix.

6.    Estimate the consequences for the project of the identified uncertain event or condition materializing.  Enter either a qualitative (low – high) or quantitative (1-5) assessment in the “Consequences” column of the matrix.

7.    Enter the product of the likelihood and consequences scores (low/medium or 3 [1x3]) in the “Risk Score” column of the matrix.

8.    Identify the risk strategy that will be pursued with respect to the identified uncertain event or condition.  “Avoid” strategies reduce the likelihood of a negative risk occurring; “mitigate” strategies reduce the consequences of negative risk events occurring; “transfer” strategies insure against the financial consequences of negative risk events occurring; “exploit” strategies increase the likelihood of positive risk events occurring; “enhance” strategies increase the consequences of positive risk events occurring; “share” strategies pool the consequences of positive risk events occurring with others.  Enter the selected strategy in the “Strategy” column of the matrix.

9.    Describe the action that will be taken to implement the selected strategy in the “Action Plan” column of the matrix.

10.  Identify the team member responsible for taking note of the evidence that an uncertain event or condition is materializing, communicating that information, and initiating implementation of the action plan in the “Assigned To” column of the matrix.

11.  Note whether or not the uncertain event or condition has materialized in the “Event?” column of the matrix.

12.  Identify the action taken in response in the “Action” column of the matrix.

13.  Enter the team’s assessment of the effectiveness of the action taken (including those actions that were were ineffective along with an assessment of why they proved ineffective) and any ideas or suggestions for better planning for or responding to similar uncertain events or conditions in future in the "Comment" column of the matrix.

14.       Review the matrix regularly and no less frequently than alternate team meetings to report on previously identified uncertain events or conditions that have or have not materialized and to identify and analyze uncertain events or conditions which have not yet been identified but which may occur in the future.  Update the matrix accordingly.

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