The purpose of this assignment is to develop a risk assessment matrix. This is the first step in developing a contingency or recovery plan. In the previous module, you learned about COVID-19 and its impacts on an organization. As you learned in your readings for this module, there are several different risks and barriers for supply chains. In this assignment, you will create a risk assessment for supply chains.

Instructions

Complete the following steps:

What Is a Risk Matrix

A risk matrix are probably the inter-industry safety standard for the tool used in risk evaluation. Inaviation SMS programsthey are ubiquitous. They use "probability" and "severity" to quantify the scope of a real or hypothetical safety scenario. The quantification is generally broken into 3 categories:

• Acceptable risk (green);
• Unacceptable risk (red); and
• Ideally risk that is as low as reasonably possible (ALARP) (yellow), though risk in this middle section should be monitored carefully to ensure that reasonable controls are in place.

Some organizations use more colors, such as light green and/or orange. Extra colors only provide further "aesthetic" rather than quantification. Risk matrix are ultimatelyused risk management toolsused to rank risks with the risk grid.

The Risk Matrix Grid

Risk matrices are broken into a grid. Matrices grids are usually 5x5, though it can be larger or smaller depending on company needs. The grid is used to assign a "number" to the risk, which is combination of Probability x Severity, and represents the scope of the risk.

The risk matrix grid:

• Usually increases in severity from left (low) to right (high);
• Usually increases in probability from bottom (low) to top (high); but
• A risk matrix can move in any direction, so you may see risk matrices that move from right to left and top to bottom, right to left and bottom to top, or left to right and top to bottom.

As you can see, there is a lot of flexibility about how the risk matrix "appears." What matters most is what is consistent and comfortable in your organization.

Despite the fact that a risk matrix only contains two variables, there is a surprising amount confusion or misunderstanding about how to use it. I constantly see different opinions about how to use it - some of these opinions are better than others. We will look at probability and severity below, and then consider the 2 "best use cases" of a risk matrix during risk assessment.

What Is a Probability in Risk Matrix

Risk matrix probabilityis used in different ways depending on how the organization defines "probability." Probability usually means likelihood or frequency, and is ranges from "very rare in industry" to "reported several times a year in company." Probably can be used to quantify:

2. The likelihood of a risk event, such as a runway incursion;
4. The likelihood of negative consequences materializing, such as aircraft damage from bird strike; or
6. An overall probability of a risk scenario, including the likelihood of a risk event and negative consequences materializing.

Many companies understand probability as likelihood of consequences, though you can also use it to assess probability of risk events. Likelihood is assigned a letter value for each increment in likelihood. Low probability is assigned A. High likelihood (in a 5x5 grid) is assigned an E.

What Is Severity in Risk Matrix

Severity in risk matricesis more streamlined in use than probability. Severity consists of:

• The severity of impacts in safety events; and
• Only accounts for "likely" outcomes.

Severity is given in a range of numbers, starting at 1 (low severity), and incrementing up by 1 each row. In a 5x5 risk matrix grid, high severity would be assigned a value of 5.

Severity is generally considered as ranging from:

• Negligible (1 rating): slight injury/damage, low financial consequences, and/or little effect on mission; to
• Catastrophic (5 rating): multiple fatality, extremely high financial consequences, and/or mission failure

High severity risk assessments should require extensive investigations by a company and every available resource to mitigate the exposure of the safety incident.

Using a Risk Matrix in a Risk Assessment

When it comes to using a risk matrix on arisk assessment, there are 2 primary approaches that companies adopt. It's important remember the purpose of using risk matrices in risk assessments:

• NOT USED to make decisions; but
• USED to rank safety events, as in to say, "here's basically what we are looking at with this safety incident."

A risk matrix bad is a bad tool to used in making decisions. It is designed to provide a number/letter combination to rank an event. During risk assessment, the combination of probability and severity that is decided upon will provide the number/letter combo. Some examples for a 5x5 grid are:

• Low probability and low severity: 1A
• High probability and high severity: 5A
• Medium-low probability and medium-high severity: 4B
• Medium probability and medium severity: 3C

The numbers provide a powerful way to assess a company's historical exposure to risk. For example, by tracking each issue's severity and probability in an aviation safety database or Excel spreadsheet a company could easily assess averages and frequency of certain severities and/or probabilities occurring.

Related Articles on Risk Matrix in Aviation SMS

• What is a Risk Matrix and Risk Assessment in Aviation SMS
• How to Define Severity and Likelihood Criteria on Your Risk Matrix
• How to Create Your Risk Matrix for Risk Assessments in Aviation SMS
• How to Define Your Risk Matrix in Aviation SMS
• After you review the risk assessment information, create your own 5x5 risk matrix. In short, you are evaluating what risks could occur to a supply chain and how likely it is to occur. Your location is Indiana and depending on how you analyze the risk, answers will be different between classmates. For example, one student may analyze the risk from a global perspective while another may look at it from a domestic point of view. Some may look at it from manufacturing while others may look at it from procurement or transportation. Any of these are acceptable. The point is to brainstorm ways that the supply chain can be disrupted, knowing that a 5x5 matrix will not cover all of the possibilities.  

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