Why You Need a Risk Control Matrix

In today’s threat environment, cybersecurity, compliance, climate change, and fraud risks can significantly influence your organization’s bottom line and reputation. An external risk event like the pandemic highlights an increasing need for organizations to create a risk control plan that helps them enforce specific strategies and achieve their objectives, even during an unprecedented risk environment.

Although you can never eliminate business risks completely, prevention is the best way to minimize loss. By clarifying, evaluating, and analyzing potential risks with a risk control matrix, you’ll better understand your risk landscape and accurately assess and manage emerging risks before they occur, saving your organization money, time, and resources. 

What Is the Risk Control Matrix?

A risk control matrix, also known as a risk and control matrix, is a visual tool that helps businesses identify, rank, and execute risk mitigation measures so they can prioritize risk and the potential impact. This powerful tool is created at the intersection of two primary reflections: the probability that a potential risk will occur and the potential consequences the risk will have on the organization.

After identifying and ranking risks, a risk matrix categorizes emerging risks as low risk, medium risk, or high risk. Risk matrices help organizations prioritize risk and develop an effective risk mitigation strategy. 

What Are the Main Elements of a Risk Control Matrix?

Security experts often use a risk control matrix to analyze various potential hazards during a risk analysis. Understanding the critical elements of a risk and control matrix can help you manage risks effectively and reduce security breaches your organization is exposed to. The three primary components of a risk control matrix are:

Risk Severity

This is the amount of loss or damage a risk can cause, and its risk rating is ranked on a four-point scale as follows:

• Catastrophic Severity (4): This requires immediate intervention because it can cause significant damage and loss.
• Critical Severity (3): This requires immediate corrective action because it can cause substantial loss or significant system damage.
• Marginal Severity (2): Risks with this severity can be controlled or counteracted without severe loss or significant system damage.
• Negligible Severity (2): Risks with this type of severity will result in minor or no system damage.

Probability

This is the possibility or likelihood of a potential hazard occurring, and it’s usually ranked on a five-point scale.

• Frequent (5): Likely to happen many times in the lifetime of a system or project.
• Probable (4): This risk will happen several times in the lifespan of a system.
• Occasional (3): This threat will occur sometime in the lifetime of a system.
• Remote (2): Unlikely but can occur sometime in the lifespan of a system.
• Improbable (1): Highly unlikely to occur.

Risk Assessment

You can determine risk assessment values by multiplying severity scores with probability scores. Often, the higher the risk assessment, the higher the overall risk for the project. This element balances the weight of probability and severity.

At RiskRecon by Mastercard, our portfolio issue risk matrix offers instant visibility into your organization's risks. This interactive matrix allows you to identify the service providers with issues with each risk priority. This way, RiskRecon makes it easier for you to understand and act on your organization’s third-party risks. 

How Do You Design a Risk Control Matrix for Your Projects?

Again, a risk control matrix helps organizations identify and evaluate potential risks and controls in a process, project, or system. It can help organizations prioritize their actions, track their progress, and guarantee compliance with various regulations and standards. In this section, you’ll learn how to design a risk control matrix for your projects using a simple four-step approach.

Define Your Scope and Objectives

The first step in designing a risk matrix is to determine the objectives and scope of your projects. What are the primary outcomes, outputs, and activities you want to accomplish? What are the limitations of your project? Who are your stakeholders, and what do they expect from the project? You must thoroughly understand your project's objectives and scope before you can identify its risks and security controls.

The Committee of Sponsoring Organizations (COSO) framework offers globally recognized risk management and internal controls standards. You can consult it to see the types of risks and controls that apply to your situation and how you’ll track the effectiveness of the security controls in your risk matrix.

Identify Potential Risks and Controls

Next, identify potential risks and controls relevant to your project’s objectives and scope. Risks are conditions or events that can negatively impact your project’s delivery, quality, or performance. Controls are security measures or actions that you can take to mitigate, prevent, or respond to risks. You can leverage various sources and methods to identify controls and risks, like interviews, brainstorming, historical data, surveys, industry standards, checklists, and best practices. Document the controls and risks in a risk register, a table that lists the risk description, name, likelihood, category, impact, control description, name, effectiveness, and type.

Consider everything that may prevent you from achieving your project’s objectives when listing risks. Including detective and preventive controls to address different risks is fantastic.

Assess Potential Risks and Controls

Next, assess the controls and risks you’ve identified. You should evaluate the likelihood and impact of every potential risk and the effectiveness and type of every control. Impact can be defined as the extent of loss or harm a potential threat could cause to your cybersecurity project. Likelihood is the frequency or probability of a potential risk occurring. You can leverage quantitative or qualitative assessment methods to rate the likelihood and impact of every risk as scores, scales, formulas, or matrices. Control effectiveness is the degree to which controls minimize the likelihood or impact of potential risk. Control type refers to the control category, like corrective, detective, or preventive. You can leverage risk criteria, tests, or indicators to assess control effectiveness, like efficiency, compliance, timeliness, or reliability.

Preventative controls are effective at minimizing the residual probability of a risk occurring. Detective controls detect if a risk has occurred and lower the residual impact. 

Don’t forget that no single security control is 100% effective; thus, a balance of detective and preventive controls is fantastic. Testing the effectiveness of security controls is crucial because many of the worst cybersecurity breaches occur when several controls fail at once.

Design Your Risk Control Matrix

The final step is to design your risk and control matrix, a table summarizing potential risks and controls for each outcome, output, or activity of your projects. It showcases the relationship between controls and risks and the degree of risk exposure after applying the security controls. You can use software or templates to create your risk matrix or design your format. Essentially, a risk control matrix must include an outcome/output, activity, risk, risk rating, control, residual risk, and control rating. You must periodically analyze and update your risk control matrix throughout your project to account for new information or any changes. 

When Do You Need a Risk Control Matrix?

A risk control matrix can come in handy when you want to prioritize risks accurately. It allows you to prioritize the most critical risks your organization faces. Again, having an elaborate overview of today’s modern cybersecurity threat environment is crucial in preventing value losses. To succeed, all organizations must take on some level of risk as calculated threats based on a practical risk analysis can help organizations take on risks in a manner that allows them to accomplish their business objectives.

Although it might be tempting to allocate money and time to all potential hazards, some operational risks, like significant reputational damage because of a data breach, must be prioritized before others.

Thus, you need a risk and control matrix when you want to identify the most pressing risks to your organization and plan for them.

Determining the most critical and pressing system vulnerabilities is a daunting task. Fortunately, RiskRecon has built valuable algorithms to help you automatically identify system weaknesses and asset value based on a thorough analysis of system code, content, and configurations. Automating risk assessment and prioritization can save you time and offer more accurate and reliable results. 

Who Is a Risk Control Matrix For?

As part of the risk assessment and management process, organizations leverage risk matrices to help them prioritize various risks and create a robust risk mitigation strategy. Risk matrices work on small and large scales; this system that aids risk prioritization can be applied at the discrete or enterprise-level project. 

What Does a Risk Control Matrix Look Like?

A risk control matrix is a graph showing the probability of a risk occurring on one axis and the damage scale on the other. 

There’s no specific rule on labeling these axes, except that different risk levels should be scored quantitatively, with values increasing incrementally depending on set characteristics.

The most popular scale has four values: 4 (extreme damage/probability), 3 (high likelihood/damage), 2 (moderate damage/probability), and 1 (Little to no damage/probability).

However, there’s no single rule on how the numbers should go or what each score should represent. What matters is a consistent approach when measuring the threats.

After labeling each axis, divide the graph into a series of color-coordinated blocks based on the risk score until you end up with a chart showing your organization’s risk criteria and appetite. 

What Are the Different Severity Levels of Risk?

One of the common ways to describe severity levels of risk is using an ordinal scale. That’s because it’s often daunting to quantify the amount of damage that may occur accurately. An ordinal scale ranks risk severity from low to high. Usually, the risk severity in a risk matrix is color-coded from red to green.

Here’s an example of an ordinal scale of 4:

• Low Risk (green): These risks are unlikely to occur, and they pose minor damage if they occur. Often, these risks are acceptable because the cost to prevent them is more than the costs incurred if the threat occurs.
• Medium Risk (yellow): These risks are a nuisance and can result in project delays, but if you take the right action during project planning to prevent and stop these risks, your project will succeed. Don’t ignore medium risks; however, they need not be a top priority.
• High Risk (amber): Risks with this severity level are highly likely to occur and significantly damage your organization. Thus, it’s wise to prioritize them in your risk mitigation strategy.
• Critical risk (red): These potential hazards are highly likely to occur and pose significant problems to your organization. Thus, you must be careful with any circumstances that present such threats. These risks are unacceptable, and you must take immediate action to lower your risk score. Based on your risk scale, it’s crucial to question how to eradicate these potential threats. You may stop any activity that creates the threat or change it significantly to make it less damaging or less likely to occur.

How Does a Risk Control Matrix Help Fortify Cybersecurity?

Businesses are starting to understand the value of cybersecurity in the modern business environment. Failure to sufficiently protect systems and networks can result in privacy breaches and cyber attacks compromising customers’ private data.

Thus, you may think that the best way to prevent this threat is to close any gaps you find. If you account for every risk, then your cybersecurity and strategic risk management strategies are as robust as they could possibly be, right?

Sadly, fortifying cybersecurity isn’t that simple. Any company that tries this approach soon realizes they face numerous risks, and preventing and mitigating them all is prohibitively costly. Also, it’d result in a complicated set of technologies and processes that might be challenging to maintain.

Thus, best practice guidelines, like the international standard for information security, ISO 27001--suggest that businesses prioritize the catastrophic risks and find appropriate ways to address them.

This is where a risk control matrix comes in. It’s a tool that allows companies to ‘score’ their risks based on two fundamental questions:

• How likely is it that this potential threat will occur?
• How damaging will this potential risk be to our company?

Risk control matrices help businesses consider both factors and create a single value that accounts for both issues.

A risk control matrix can also help you fortify your organization’s cybersecurity by helping you understand your most significant weaknesses, ensuring you respond appropriately.

Further, it can pinpoint cybersecurity threats that require the most resources and money to fix. Few companies have the resources to invest in mitigating every cyber threat; thus, a scoring system based on the risk and control matrix provides an accurate scientific rationale for their security risk assessments and mitigation strategies.

With a risk control matrix, you don’t have to rely on assumptions, plus it offers a consistent approach for measuring cybersecurity risks across the organization. This reduces the odds of certain risks being weighted more heavily than others due to the assessor's biases.

RiskRecon’s Priority Risk Matrix

A risk and control matrix is crucial for organizations of all sizes. Not only does it help prioritize potential risks, but it also offers a visual roadmap and representation for stakeholders and employees alike, ensuring there’s a clear plan of action all the time. 

Our in-platform Priority Risk Matrix gives you instant visibility into the risk distribution of security issues across your entire vendor portfolio. Our interactive matrix enables you to identify the vendors that have issues within each risk priority. This is yet another way that RiskRecon makes it easy for you to understand and act on your third-party risk by providing: 

 To find out more, check out our 30-day trial here.