How to Build a Risk Matrix from Scratch (and Why you may Never want to Use one)
Watch some of the best ideas in risk and decision making at the Risk Management Awareness week, streaming now at https://2021.riskawarenessweek.com The Risk Matrix (other names: Risk Heatmap, PI Graph, etc.) seems ubiquitous in project management and/or Risk Management these days. Despite that, there has been an outcry from some circles demeaning the risk matrix as a bad tool: that it is very bad for decision making. But is it really?
There was a time that when a project needed to make some important decisions, science and math were used to build a risk matrix from first principles. And this happened many times during the project; whenever important decisions needed to be made a new risk matrix focusing specifically on those decisions was built from scratch, and then used to make the decisions.
This workshop will walk through construction of a risk matrix using the science and math. Nobody ever said that risk management or project decisions were easy, and building a risk matrix from scratch isn’t either. Proper construction of a risk matrix is pretty complex.
0:00 Introduction
3:32 My Introduction to Risk Matrices
11:51 Risk Matrix: Always used for Decision Making
14:20 How to Build a Risk Matrix from Scratch in Seven Steps
19:26 Steps 4-7
22:13 Demonstration Continued 3
23:02 Demonstration Final
23:25 Risk Factor Formula Drives Everything
24:55 Artifactually Added Risk Tolerance/Aversion
26:49 Risk Matrix Construction Challenges
28:28 Marginal Value of Money
30:27 Consequence Values Effects
31:53 Consequence Values Matrix Changes
33:11 Probability Value Effects
35:19 Problem Effects on Probability Axis
41:19 Non-stationarity of Decision Maker Values
43:01 Can You Get a "Reasonably Good" Decision using a Risk Matr
46:14 Conclusions
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