Designing and exploring risk matrices with MACBETH

Abstract

Risk matrices are adopted and recommended by many organizations, but the way they are usually constructed violates some basic theoretical principles, giving rise to inconsistent risk ratings. This paper studies ways in which multiple criteria and portfolio decision analyses can improve the design and deployment of risk matrices, using MACBETH (the \Measuring Attractiveness by a Categorical Based Evaluation TecHnique"). Firstly, it introduces`value risk-matrices', built with MACBETH in the following modeling steps: (1) building a value measurement scale on each impact dimension and constructing a subjective probability scale, (2) additive aggregation of the value scales into a cumulative value scale, and (3) design of the value risk-matrix. The value and probability scores of risks are plotted in the matrix and its analysis informs the identi¯cation of mitigation actions, which can then be prioritized making use of the recent portfolio module of the MACBETH decision support system. Taken all together, the paper sketches a new modeling approach for Improving Risk Matrices (IRIS).

How to Design Rating Schemes of Risk Matrices: A Sequential Updating Approach

“…Risk matrices are easy to implement and can be implemented even where data are limited. Therefore, they have become popular decision-support tools in both the public and private sectors, (3)(4)(5)(6) in areas such as well-integrity risk, (7) drilling hazard management, (8) climatic change responses, (9) and so on. However, despite its simplicity and wide usage, recent research has revealed several flaws in the risk matrix.…”

Improving occupational health and safety risk evaluation through decision analysis

“…For instance, the National Patient Safety Agency from the United Kingdom has recommended risk managers to use RMs in the National Health Service within an integrated system of risk assessment (National Patient Safety Agency, ) and the British Standard BS 8800:2004 for evaluating OHS risks (Technical Committee HS/1, ). Additional factors have stimulated the popularity of RMs, namely their easiness and quickness of use, their demand for little expertise (Oliveira et al., ), and their widespread incorporation in several popular software packages, such as in the Environment, Health, and Safety Risk Assessment module of SAP (SAP AG, ).…”

“…Despite their extensive use, RMs have been shown to violate some theoretical principles and suffer from methodological problems (Cox, , ; Pickering and Cowley, ; Oliveira et al., ), shared by the RM in Table , such as:…”

“…Concerning the latter, risk managers often give higher priority to the management of risks in the top categories of RMs, which can translate into an inefficient allocation of resources. In fact, under the presence of a budget, the selection of risk mitigation measures needs to account for the extent to which a measure may decrease risk impacts and/or probabilities, and also for its implementation costs (Oliveira et al., ).…”

“…The widespread use of RMs and their ease of use motivated the development of the IRIS approach for improving RMs (Oliveira et al., ) in view of overcoming those methodological issues (note that it differs from the IRIS interactive robustness analysis and parameters’ inference for multicriteria sorting problems approach reported in the multicriteria literature; Dias and Mousseau, ). At the core of the application of IRIS is the construction of a “value risk matrix” (VRM) enabling to classify each risk event by combining its probability of occurrence with the cumulative value of avoiding its impacts.…”