Sample risk matrix

Almost certain
The consequence is expected to
occur in most circumstances,
eg 80% + chance of
occurring in the next 12 months.

Likely
The consequence has a reasonably
high chance of occurring in many
circumstances, eg 60% - 80%
chance of occurring in the next 12
months.

Possible
The consequence could
conceivably occur in some
LIKELIHOOD

circumstances, eg 30% - 60%

chance of occurring
in the next 12 months.

Unlikely
The consequence is unlikely to
occur in most circumstances,
eg 1% - 30% chance of occurring
in the next 12 months.

Rare
The consequence would occur only
in exceptional circumstances,
eg less than 1% chance of occurring
in the next 12 months.

Insignificant Minor Moderate Major Extreme

Operational impact easily handled Some disruption possible; able to Significant disruption possible; Business operations severely Disaster; extreme impact on staff,
through normal internal control be managed with management managed with additional damaged or disrupted; requires plant, and/or operations.
processes. input. management input and resources. extraordinary management input
and resources.

CONSEQUENCE
Risk escalation/decision-making
Low Moderate High Critical
Risk managed through routine Risk to be reported to relevant Risk to be reported to Risk to be reported
management/internal manager; may require additional chief executive and to the board to
control procedures. risk treatment actions. senior management team approve and monitor
to approve and monitor risk risk treatment actions.
treatment actions.
Examples of risk • litigation risks
• GST problems
Business: • tax penalties
• wrong business strategy • health and safety risks
• competitive pressure on price/market share • environmental problems (not just in New Zealand but possibly in all jurisdictions in which the company
• general economic problems operates).
• regional economic problems
• political risks Operational and other:
• obsolescence of technology • business processes not aligned to strategic goals
• substitute products • failure of major change initiatives
• adverse government policy • loss of entrepreneurial flair
• decline of industry sector • shortage of raw materials
• takeover target • shortage of skills
• inability to raise further capital • physical disasters (including fire and earthquake)
• unsuccessful acquisition • failure to create and exploit intangible assets
• failure to innovate. • loss of intangible assets
• breach of confidentiality
Financial: • loss of physical assets
• liquidity risk • lack of business continuity
• market risk • succession problems
• going concern problems • loss of key personnel
• overtrading • inability to reduce cost base
• credit risk • imposition by major customers of harsh contractual obligations
• interest rate risk • over-reliance on single or key suppliers or customers
• currency risk • failure of new products or services
• high cost of capital • poor service levels
• misuse of financial resources • failure to satisfy customers
• occurrence of types of fraud to which the company is susceptible • quality problems
• misstatement risk related to published financial information • lack of orders
• breakdown of accounting system • failure of major project
• unrecorded liabilities • loss of key contracts
• unreliable accounting records • inability to make use of the internet
• importation of viruses into IT systems • failure of outsource provider to deliver
• penetration and attack of IT systems by hackers • industrial action
• decisions based on incomplete or faulty information • failure of technology-related projects
• too much data and not enough analysis • lack of employee motivation or efficiency
• unfulfilled promises to investors. • inability to implement change
• inefficient/ineffective processing of documents
Compliance:
• poor brand management
• breach of:
• product liability
o Companies Act requirements
• inefficient/ineffective management process
o Financial Reporting Act requirements
• business probity issues
o stock exchange listing rules in New Zealand and elsewhere
o Commerce Act • other issues giving rise to reputational problems
o other laws and regulations • missed business opportunities.