THE TROUBLE WITH RISK MATRICES

Risk matrices are used in many organizations as a basis for risk management decisions. They are easy-to-use and have intuitive appeal. They are often defended as the only avenue of approach to risk management because quantitative information is scarce or nonexistent. Unfortunately their theoretical basis is super-cial and the validity of the qualitative information they em-ploy is highly suspect. Assessments of the likelihood of occur-rence and their impacts su¤er all the shortcomings associated with subjective assessment. These all combine to produce a less than useful portayal of risk management information. The true value of subject matter experts (SME) is in aiding the de-vlopemnt of quantitative models representing the inter-relations between variables that ultimately determine the outcome of in-terest for the decision maker.