What Is A Risk Assessment Matrix?

What Is A Risk Assessment Matrix?

What is a Risk Assessment Matrix, a risk assessment matrix is a visual representation of the probability and likelihood against a specific category of the outcome, which is typically a variable. Its simplest form is a graph that depicts the probability of an event given the categories of possible outcomes. This simple framework to improve the visibility of financial risks and aid management decision-making is an important tool for managers to exploit their operational models’ inputs to formulate policy recommendations. It is handy when combined with other financial metrics to provide a full picture of the organization’s capability to take risks.

Risk assessment has been recognized as one of the main tools in management function since its inception. Early approaches have attempted to deal more with the identification and categorization of risks; however, with the progress in information technology and the globalization of companies, risk management has become a rapidly evolving field with a wide range of applications and modeling techniques.