Within Project Risk Management, Risks do not exist in isolation; While they are typically assessed individually, they have the potential to interact with each other and significantly amplify the resulting impacts and/ or the speed of onset of the risks, thus affecting the project progress far more significantly than in the case where each risk operated in isolation from other risks.
In the COSO ERM Integrated framework , the purpose of risk assessment is to assess how big the risks are, both individually and collectively, in order to focus management’s attention on the most important threats and opportunities, and to lay the groundwork for risk response. Risk assessment is all about measuring and prioritizing risks so that risk levels are managed within defined tolerance thresholds without being overcontrolled or forgoing desirable opportunities.
It is proposed that we perform Risk Interaction Assessment in a 2-step approach, as documented below:
- Use the enhanced Risk Interaction Matrix (template attached) to quantify & categorize risks based on a Risk Interaction quantification factor. The Risk Quantification factor shall assess the extent of interaction of the Y-axis risk on the X-axis risk.
- Use the Risk Interaction map (template attached) to generate a visual representation of identified risk interactions.
In the Risk Interaction Matrix, risks are documented in a series on the X-axis, and in the same order on the Y-axis. For each Risk on the X-axis, the Risk Interaction is measured against each risk documented on the Y-axis, and the Risk Interaction quantification is captured at the junction of the 2 risks within the Matrix.
In the Risk Interaction Map, the traditional representation of Consequence and Likelihood of risks on an X-Y matrix is adopted, with Bubble sizes representing quantification of risk interactions.
This map adds immense value to a Senior Management review, by throwing up significant risk interactions that exist, and force actions to address these risks.
Risk Interaction Matrix – sample image
Risk Interaction Map – sample image
Risk Interaction – Criteria ranges (Samples only)
The template for Risk Interaction Matrix is attached here: pmExcell Risk Interaction Matrix template
The template for Risk Interaction Map is attached here: pmExcell Risk Interaction Map template
 Risk Management in Practice, Dr. Curtis, P. and Carey, M, Deloitte & Touche LLP. Research commissioned by COSO (Committee of Sponsoring Organizations of the Treadway Commission)