Maintaining an organization requires a lot of study, research, and planning because it is essential to be aware of the risks involved and be prepared to face them. Although it is not possible to predict all the problems that may arise, the risk matrix can be a great ally for you to feel better prepared when these situations occur.
Identifying and evaluating the main risks present in a company is fundamental to anticipating them and taking the necessary measures for their mitigation. We have prepared a complete content for you about the risk matrix and how ChatGPT can collaborate in the identification and classification of this model. Keep reading and understand!
But what is a Risk Matrix?
The Risk Matrix is a fundamental tool in risk management. This model is often used visually to identify which risks need more attention and which actions should be taken to manage the risks involved.
The great differential of the Risk Matrix is presenting information visually, which provides a significant advantage in data analysis. Because it is a graphical tool, it is easy to identify which risks will have a great impact on the organization, collaborating in making more assertive decisions.
In addition, because it is a tool that is easy to understand and presents clear and objective information, the Risk Matrix also helps to engage the team in the risk management process.
How does the tool work?
When using the Matrix, it is necessary to evaluate each risk based on two criteria: the likelihood of occurring and the impact it can generate on the company. Through this tool, it is also possible to position the risks in a table with two dimensions (likelihood and impact) and use rows and columns to determine the level of criticality of the risk.
In the vertical line, the level of likelihood is presented, that is, the chances of the risk materializing. In the horizontal line, the level of impact that the risk can cause on the organization is presented. Based on these criteria, risks are categorized into different degrees, namely:
- Green color for low risk;
- Yellow color for medium risk;
- Red color for high risk.
In other words, risks that are classified as high (red) must undergo greater analysis than those classified as medium (yellow) and those classified as low (green), which require less attention.
Since the dimensions of a Risk Matrix are categorized by Likelihood and Impact, now let’s detail these two dimensions.
What does Likelihood mean?
In the matrix, Likelihood (vertical axis) is one of the variables used to evaluate a particular risk. It characterizes the chance that an unwanted risk will occur and become a problem for the organization. In general, Probability can be expressed in terms of a percentage or on a numerical scale, with values that can range from low to high. For example:
- Very low = 1% to 10% = probably will not happen;
- Low = 11% to 30% = may happen once a year;
- Moderate = 31% to 50% = may occur more than once a year;
- High = 51% to 70% = it may happen once a month;
- Very high = 71% to 90% = it may occur once a week.
What does Impact mean?
On the other hand, Impact (horizontal axis) is used to evaluate a particular risk. This variable represents the relevance of the consequences that an unwanted event can bring if it occurs in an organization. The impact can be classified into levels ranging from low to high and in financial terms, time, and image, among others. Unlike Likelihood, Impact is not represented by a percentage.
Thus, we have in its classification the levels:
- Too low: Little significant consequences;
- Low: Consequences that can be reversible in the short and medium term with negligible cost;
- Moderate: Reversible consequences in the short and medium term with little cost;
- High: Reversible consequences in the short and medium term with a high cost;
- Very high: Irreversible consequences or costs outside the budget.
Likelihood and Impact Relationship in the Risk Matrix
The combination of these two variables allows the definition of the criticality of a risk, that is, how critical it is to the company. Generally, the risk matrix is divided into quadrants or zones, each representing a different combination of probability and impact, and indicating a level of criticality.
However, it is important to keep in mind that the number of levels for Likelihood and Impact should be the same. For example, if it is decided that the classification of Likelihood will be low, medium, and high (three levels), the Impact should also have three levels, classified as insignificant, moderate, or catastrophic.
How to Create an Effective Risk Matrix?
To build an efficient Risk Matrix, it is important to follow a few steps:
1- Define the levels of likelihood and impact
The first step involves defining the criteria of likelihood and impact, that is, how many levels will be and how they will be identified to adapt more appropriately to the company’s scenario.
2- Choose suitable software
Para auxiliar no processo de apoio da avaliação de riscos, onde a matriz será implementada, é necessário escolher um software adequado e especializado em gestão de riscos, para te ajudar na tomada das decisões mais assertivas.
3- Define the level of criticality of each risk
It is also necessary to identify and evaluate risks regarding their probability and impact. This evaluation should be carried out by professionals who have knowledge about the area in question, as they can perform a more realistic and accurate analysis.
Além disso, com a determinação da probabilidade e impacto de cada risco, é possível classificá-los em uma matriz de riscos e criar um ranking, que permite priorizar ações e ser mais assertivo no gerenciamento dos trabalhos.
4- Control the identified risks
After identifying the involved risks, it is necessary to think about possible solutions for these problems. In this step, it is essential to have a meeting to exchange suggestions among the company’s collaborators. But remember: suggestions should prioritize financial savings and the practicality of your business. Right after that, it is necessary to go through the managers’ approval to implement the defined action.
5- Implement solutions
To achieve effective results, after identifying and classifying risks, it is necessary to act and implement solutions. For this, it is essential to count on the engagement of the entire team since it will be necessary to adapt to a new routine.Furthermore, to ensure successful implementation, it is essential that everyone has clarity and transparency about the changes that will be made, thus avoiding confusion and application errors.
Benefits of using a Risk Matrix + ChatGPT
There are several benefits to using a Risk Matrix in enterprise risk management processes. One of the great differentials is that this tool allows for a clearer and more objective evaluation of the risks involved in a particular process, project, or business.
Through the analysis of likelihood and impact, it is also possible to classify risks into different levels, which facilitates the prioritization of work and decision-making.
With the help of ChatGPT, it is possible to further enhance the use of the risk matrix. The model can be used to offer suggestions for best practices in risk management, to indicate which are the most common risks in a particular sector or business, as well as to provide valuable insights into trends and changes in the external environment that may impact the organization.
A integração do ChatGPT com a Matriz de Riscos também pode atuar como um parceiro estratégico, auxiliando as empresas a se manterem mais seguras e preparadas para enfrentar desafios. Então, que tal contar com a ajuda de um software, como o Belt, que dispõe justamente dessas funcionalidades?
Get to know Belt
Among the services that Actio, é a primeira empresa de softwares de gestão brasileira a realizar a integração com o ChatGPT!
This means that our risk management module now has a virtual consultant with Artificial Intelligence to guide users in identifying causes, ensuring the formation of a results-oriented culture and methodological coherence in the process.
With Belt, será possível identificar, de forma mais precisa, os riscos envolvidos em cada atividade, permitindo a criação de planos de mitigação mais assertivos e a adoção de controles mais eficazes, que se adequam às características específicas de cada risco.
The integration of ChatGPT also allows for improved decision-making in your business, as it is possible to access accurate real-time information in Belt, and professionals who perform risky tasks can dedicate themselves to more analytical and strategic management tasks, thereby increasing their productivity and delivering better results.
As you can already see, with Actioit has become even easier to provide a safer and more reliable work environment for your workers, as well as ensure greater efficiency at all stages of the management process. Don’t forget to request a quote from our consultants.
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