Risk assessment matrix complete guide

Virgil

Virgil

Jan 22, 2025

Risk assessments are like blueprints for your risk management strategy, mapping out the strongholds and weak spots with precision while meticulously detailing where to focus your resources.


When you know the business impact tied to each risk in different risk categories and their likelihood of occurrence, you can easily make strategic decisions like which risks to accept, which risks to tolerate, which risks to mitigate, and with what intensity.


That’s where the risk assessment matrix comes into play, transforming a jumble of arbitrary risks into a clear, actionable game plan.


In this article, we explain what a risk assessment matrix is, why you need it, and how you can build one to guide your risk management strategy.

What is a risk assessment matrix?

A risk assessment matrix is a key tool for visualizing the severity of risk levels and prioritizing them effectively. The matrix categorizes risks into risk ratings like high, medium, and low, revealing both how likely each risk is to occur and its potential operational, financial, or regulatory impact on your organization. This clear framework helps security teams identify which risks need immediate attention and which can be monitored over time.

Typically, it’s a grid where one axis represents the likelihood of a risk occurring (from low to high), and the other represents the impact of the risk profile. As a result, when operational risks are placed on the grid, they reveal a clear picture of the ones that can be dodged, the ones that are operationally critical to fix, and the ones that should be combated over a period of time. 

How does the risk assessment matrix work?

A risk matrix is a visual tool that categorizes risks into three bands of severity—high, medium, and low. It offers a snapshot of the threat landscape relevant to your business and how your defenses are fair against it. 

For example, let’s assess risks for a financial services company.

Let’s consider an assessment for phishing risk. In that case, the probability of a phishing attack on a business is very high, and the severity of a phishing impact in most cases is major; as risk impact = severity*probability, the overall potential impact of risk is high.

Steps to Plan Risk Assessment Matrix

Building your very own risk assessment matrix consists of 5 steps that help you identify your threat landscape, gauge their probability of occurrence for your business, and determine the severity of risks if they occur. 

Here is a step-by-step process for building your risk matrix:

1) Identify risk factors

If you are running a business, you face negative risks, such as operational, financial, or strategic risks. Some are natural byproducts of business operations or fast-paced growth, and some are driven by external threat actors.   

For example, here is a list of some potential risks: 

  • A phishing attack could negatively impact your business
  • Loss of supply chain network due to a system compromiseLoss of customer data due to a ransomware attack
  • Non-compliance against data protection regulations that invite legal risks
  • Natural disasters damage data centers, disrupt operations, and create opportunities for threat actors to exploit some vulnerabilities

2) Determine probability and impact

Once you have understood the landscape relevant to your business, you can start assessing each risk qualitatively by color-coding them into red, green, or yellow or quantitatively by assigning a value range to each color.

For example:  

  • Risk probability can be rated on a scale (e.g., Low(0-3), Medium(4-7), High(8-10))
  • Severity can be rated based on financial loss, reputational damage, and regulatory penalties (Low, Medium, High)

3) Calculating the risk impact (Severity*Probability)

In rudimentary calculations, risk impact is a product of severity and probability. This offers a great starting point when prioritizing risk management efforts. For example, here’s how you calculate risk impact based on the likelihood and severity of the risk:

RiskProbabilitySeverityImpact
Phishing attacksVery likelyMajorHigh
Ransomware attackLikelyMajorHigh
Non-complianceUnlikelySevereMedium

Once you have assessed risk impact using the table above, you can start plotting them on the risk matrix for visual representation and get buy-in or mitigation initiatives from stakeholders. Assume the axis as your impact and the y-axis as the likelihood of occurrence. 

Here’s an example of a risk matrix template: