Putting the appetite into risk management: Is it time to delete your risk matrix?

  • Risk management needs to become more strategic focused than reactive.
  • Common risk analysis techniques fail to recognise both the benefit and detriment in uncertainty.
  • A risk array provides a far more effective means of illustrating the breadth of potential risk outcomes to stakeholders.

Business man using knife and fork

Risk management suffers from an excess of risk aversion and a deficit of appetite which makes risk management reactive rather than integral to decision-making.

This arises from risk analysis techniques which fail to equally recognise benefit and detriment in uncertainty. The typical risk matrix almost universally assesses risk on a negative paradigm rather than for both positive opportunities and negative impacts.

The risk ranking tools are typically too simplistic and do not represent the breadth of uncertainty inherent in most uncertain events.

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