Equipment failure: likelihood 4, impact 3.Plotting each risk on the matrix according to its likelihood and impact rating, for example:.Likelihood: 1 (very unlikely) to 5 (almost certain).Evaluating the likelihood and impact of each risk using a numerical scale, for example:.Identifying potential risks such as equipment failure, supply chain disruptions, and employee injury.An Example of Probability and Impact MatrixĪn example of using a probability and impact matrix in manufacturing could be as follows:

Green condition These risks are generally fairly low in impact, probability, or both. Red condition These high-risk scores are high in impact and probability.Īmber condition (aka yellow condition) These risks are somewhat high in impact and probability. There are three common categories based on risk score: Based on the risk score, the performing organization can place the risk in differing categories to guide risk reaction. The scores within the probability-impact matrix can be referenced against the performing organization’s policies for risk reaction.

Ordinal scales Identify and rank the risks with common terms, such as very high to very unlikely, or using a RAG (red, amber, green) rating to signify the risk score.

Cardinal scales Identify the probability and impact on a numeric value from 0.01 (very low) to 1.00 (certain).

The probability of occurrence for each individual project risk is assessed as well as its impact on one or more project objectives if it does occur, using definitions of probability and impact for the project as specified in the risk management plan. This matrix specifies combinations of probability and impact that allow individual project risks to be divided into priority groups. It uses a numerical scale to rate the likelihood and impact of each risk, which can then be used to prioritize risks and develop strategies to mitigate or manage them. An example of this is documenting the opportunity and calculating benefit if the opportunity occurs.A probability and impact matrix is a tool used in qualitative risk analysis to evaluate the likelihood and impact of identified risks.

Acceptance – being willing to take advantage of the opportunity if it arises but not actively pursuing it.

Share – allocating some or all of the ownership of the opportunity to a third party.

An example of this adding more resources to finish early.

Enhance – increases the probability or the positive impacts of an opportunity.

An example of this is assigning the best workers to a project to reduce time to complete.

Exploit – eliminate the uncertainty associated with the risk to ensure it occurs.

There are also four possible risk responses strategies for positive risks, or opportunities: An example of this is documenting the risk and putting aside funds in case the risk occurs.

Accept – acknowledge the risk, but do not take any action unless the risk occurs.

An example of this is choosing a different supplier.

Mitigate – act to reduce the probability of occurrence or the impact of the risk.

Transfer – shifts the impact of the threat to as third party, together with ownership of the response.

An example of this is cancelling the project.

Avoid – eliminate the threat to protect the project from the impact of the risk.There are four possible risk response strategies for negative risks:

Risk probability impact response