A Risk Map allows you to see at a glance the most significant risks facing your project, program, or business. It is both succinct and graphical so is a great way to highlight to senior stakeholders the risks being faced.
A risk map is very easy to construct. It should be done as part of your project risk process. When we identify a risk we analyse it and categorise it by impact and probability.
Probability is our estimated likelihood that a risk will actually materialise and become an issue for us. We typically score probability as HIGH, MEDIUM, LOW. Impact is the effect the risk will have on us if the risk actually materializes. In the same way we rank probability we rank Impact as HIGH, MEDIUM, or LOW.
Let's look at some examples to illustrate. If a risk was identified that shut down our business such as a change in legislation but that the change is legislation was very unlikely then we would classify the risk as high impact (our business is finished) but low probability (it's not likely to happen in reality). Another example risk might be where if we lose our biggest customer then revenue will drop by 5%. Now if that customer had been unhappy with our service for a number of months and had been threatening to leave we might classify the risk as being of high probability and medium impact. I've chosen medium rather than high as there is a significant impact on our business but not a material impact.
Once you have identified and analysed all of the risks being faced by your project, program, or business, creating a risk map is simple. You simply plot impact on the x-axes and probability on the y-axes. You then place all the risks you've analyses onto the graph according to the assessment you've already done of impact and probability. An example of a risk map containing just two risks is shown below.
If you have identified lots of risks then placing all of them onto the risk map may make the map very difficult to read. In this case it is practical to limit the number of risks you place on the map and only highlight those risks which are most important or those which are most relevant to your audience. They can always then look in the project risk register if they choose.
In conclusion a risk map makes it easy to display the key risks being faced. They are very simple to put together and an excellent tool if you have to give a presentation to senior executives or even your team. Project risk management is a best practice for successful project management.