Ranking Risks: Rare to Certain, Negligible to Catastrophic

By ExecutiveBrief Staff

How does one construct an effective risk matrix?

1. Identify what the risk matrix is to be used for
Normally a risk matrix is called for during exercises involving hazard analyses, facility siting studies, and safety audits. Depending on the intended use of the matrix, one may need to establish tolerance or risk acceptability levels and a means of assessing the effectiveness of risk mitigation measures.
2. Define consequence and likelihood ranges
A typical risk matrix is a four by four grid. On the Y (vertical) axis is the “Probability/likelihood” description range while on the X (horizontal) axis is the “Consequence” range.

Table 1 – Sample Risk Matrix

Consequences of risks as laid down in the grid use descriptive words and are ranked according to severity: Negligible, Marginal, Critical, and Catastrophic. Negligible risks are the least severe and would be assigned the lowest rank. Inversely, catastrophic risks are those that would be first in the severity ranking. Determine tolerance by assigning dollar values to each severity ranking, as well as some qualitative characteristics of the consequence being described.  For example, Negligible Risks are those that involve USD 2,000 but less than USD 10,000 and could result in minor illness or injury to employees not exceeding a day, does not violate laws, or has little or minimal environmental damage and will be assigned Rank 1 in the matrix. Catastrophic Risks are those that involve USD 1M, could result in death or permanent disability, result in irreversible environmental damage or permanent closure to business, and will be assigned Rank 4 in the matrix.

Rank	Range	Amount of Loss in USD	Description of Loss
4	Catastrophic	1M or more	- Results in death or permanent disability of employees - Irreversible environmental damage - Closure to business
3	Critical	200,000 but less than 1M	- Results in partial permanent disability, injuries or illness of 3 employees or more - Reversible environmental damage - Violation of law/regulation
2	Marginal	10,000 but less than 200,000	- Injury or illness of resulting in one or more work days lost - Mitigable environmental damage where restoration activities can be done
1	Negligible	2,000 but less than 10,000	- Minor illness or injury to employees resulting in one day’s absence - Does not violate laws - Little or minimal environmental damage




Table 2 – Sample Consequence Ranking

     Email This Article      Print This Article
Page 2 of 3    <  1 2 3 >