The Risk of Risk Management

Risk management is like throwing diceManagement is about managing risk. If there was no risk, there would be no need to manage anything because positive outcomes would be guaranteed.

If Einstein was a management guru he would have said that managers don’t play dice, but how wrong he was!

Around the world businesses are using simple matrices to manage risk. People gather around a table and have arguments over whether a risk is low, medium or high. In most cases without proper consideration of the actual statistical issues.

Risk matrices are a poor proxy for real risk management and suck up a lot of resources to ‘manage’ trivial risk.1 Risk matrices provide false confidence in the actual risk profile and, more often than not, produce outcomes that do not add any information to the situation other than the abilty to provide colourful overviews.

At the Lucid Manager we have created an alternative risk matrix that you can use to really inform your management decisions. We bring risk management to life. No boring and meaningless numbers, but practical advice. Download this picture, assess the likelihood and consequence of your risk and act in accordance with this schedule. Success is guaranteed!

Lucid Manager Ris Matrix

  1. Cox, L.A. (2008), What’s Wrong with Risk Matrices?, Risk Analysis, (28)2: 497-512. []

2 thoughts on “The Risk of Risk Management

  1. Perhaps, Peter, we need to ask to question: “what’s right with risk matrices?”

    Collectively managers and leaders need to look at how we can all move from the false security of matrices to an approach that supports performance, innovation and opportunity management.

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