Definition: A tool used to evaluate and prioritize potential risks by assessing their probability of occurrence and impact on project objectives.
Key Components:
- Risk Identification: Listing potential project risks.
- Probability Assessment: Estimating the likelihood of each risk occurring.
- Impact Evaluation: Determining the potential effect of each risk.
- Risk Ranking: Prioritizing risks based on their assessed probability and impact.
Use Cases/Industries:
- Energy Projects: Assessing risks in oil exploration ventures.
- Construction: Evaluating potential delays in infrastructure projects.
- Manufacturing: Identifying supply chain risks in production.
Advantages:
- Proactive Risk Management: Allows for early identification and mitigation of risks.
- Resource Allocation: Focuses attention on high-priority risks.
- Improved Decision-Making: Provides a structured approach to risk assessment.
Challenges:
- Subjectivity: Assessments may be influenced by personal biases.
- Dynamic Nature of Risks: Risks can evolve, requiring continuous monitoring.
- Data Limitations: Accurate probability and impact assessments require reliable data.
Related Terms: Risk Register, Risk Management Plan, Hazard Analysis
Example: During the planning of a new offshore drilling project, the team develops a risk assessment matrix to evaluate potential environmental, safety, and financial risks, prioritizing them to implement appropriate mitigation strategies.
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Synonyms:
Risk Matrix, Probability and Impact Matrix
