- Please
explain, in a paper of at least 500 words, how you determined whether each risk
was low, medium, or high impact, and include a more detailed plan for
improvement.
Risk
Matrix
The risk matrix is
one of the most important tools for risk management in businesses, and
frequency and impact are two of its most important components. The frequency is
defined as the likelihood of it preventing a risk. This probability can be
calculated using scales of qualitative and quantitative values in the risk
matrix.
The most commonly
used scales are those with five values, such as:
Unlikely: the
likelihood of a risk materializing, that is, occurring, is far too low, almost
zero.
It's possible: the
chances are slim, but it could happen.
Occasionally: the
danger can strike at any time.
Probable: the
likelihood of the risk materializing is high; in fact, it almost always does.
Frequent: the
risk's likelihood of occurrence is extremely high.
The impact is
defined as the set of consequences brought about by the materialization of a
risk, i.e., the impact on the company, which can be economic, legal, or
reputational.
The risk matrix,
like the frequency matrix, uses scales to determine the impact, which can take
one of five forms:
Negligible: The
impact does not pose a threat to the company.
Minor: the risk
materializing has a minor impact on the company's goals.
Moderate: If the
risk materializes, it may result in a temporary loss.
Major: causes
significant delays in achieving goals.
Catastrophic: it
can bring the company's operations to a halt, leading to the company's
permanent closure.
A vertical axis
(Y) and a horizontal axis (Z) make up the risk matrix, also known as a risk map
(X). The Y axis depicts the frequency values, while the X axis depicts the
risk's impact on the organization's goals. The level of inherent risk is
calculated by multiplying the frequency values by the impact values, and it can
then be located in the matrix cells.
All of this data
allows the company to make decisions about what controls to put in place to
reduce the frequency or impact of the most serious risks.
Controls can be
preventive, detective, or corrective, and depending on their effectiveness,
they can lower risk levels, i.e., a risk can change from one value to another,
or even from one box of the matrix to another. As a result, a residual risk
(with controls) is obtained, and the values in the matrix change. Keep in mind
that in order for the risk matrix to be an effective risk management tool, it
must be updated and reassessed on a regular basis, because risks change as the
environment changes.
In general, there
are four types of risk response plans that companies can use for the
implementation of an improvement plan.
Finally, companies
can either eliminate the threat or shield themselves from its effects. While
this can be accomplished in a variety of ways, they usually shift the focus of
their project. To avoid time-sensitive threats, they adjust their timing and
targets. They alter their objectives. To avoid misunderstandings and confusion,
encourage communication and transparency. Experts can be hired to identify and
resolve technical issues. They promote but do not provide consistent training
throughout the year.