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Hello and welcome to this session and what I’m going to talk about today is your consequence matrix and the in particular the ratings that you apply for those consequences.

One of the things that I see and in fact obviously as a consultant have done in the past is to use the common understanding or around consequence matrices. But what we look at are things like or descriptors like significant  impact on the environment, significant impact on the organisations ability to achieve its objectives, irrevocable damage to the reputation of the organisation and numerous high level litigation. Now, the difficulty of course with some of those definitions is how you actually determine what numerous looks like where the guidance is significant or sustainable looks like.

Now, we’re trying to make an estimate on the consequence, if this particular event occurs all the risk materialises. What we need is something a little bit more definitive and one of the things that I’ve been working on recently is what I call continuum of performance. If we look in our organisation, we have a number of key performance indicators and we want to achieve certain the levels against those key performance indicators.

Doesn’t it follow then that if there is no minimal impact on those key performance indicators on the performance of the organisation that what you would see as an insignificant impact in your consequence matrix. Then you can work down and say but could we consider would be a minor impact a reduction in that KPI  down to this level, then what’s a moderate, then what’s a major, so it’s actually turning the conventional wisdom where we ask what the question is.

What does severe consequence look like, what we’re actually asking now is what is the target level of performance against that KPI? What would we consider an insignificant impact on the achievement of that? And then down through minor, moderate, major and down to severe. What you get is a very, very different approach to measuring consequence because now its intrinsically tied to your KPIs.

I mean that is going to be a really, really powerful tool for you to actually estimate and make judgements around the potential impacts of events as they occur. So rather than saying would have a significant impact on customer satisfaction. What you could be saying is would result in a reduction of customer satisfaction to below 50 percent for a period of excess of three months. Now, that is something that you could estimate based on past performances based on past incidents that have occurred but having these, I guess fluffy terms like significant or substantial or numerous, we just don’t know what they mine.

So stayed tuned I’m going release something as a written in the next few weeks. Where I try to explain this in a little bit more detail, but it’s something I think if we can start to link a our consequence table or our consequence tables to our performance manager or performance measures and key performance indicators. We are going to see a lot more rigour in the way that we approach the management of risk and in particular the estimation of the consequences of those events.

Now that’s all I’ve got for today but as a said be on the lookout I’ll be releasing that blog pretty soon.

As always let’s be careful out there.

Written by Rod Farrar

Rod is an accomplished risk consultant with extensive experience in the delivery of professional consultancy services to government, corporate and not-for-profit sectors. Rod takes every opportunity available to ensure his risk management knowledge remains at the ‘cutting edge’ of the discipline. Rod’s Risk Management expertise is highly sought after as is the insight he provides in his risk management training and workshop facilitation. Rod was recognised by the Risk Management Institution of Australia as the 2016 Risk Consultant of the Year and one of the first five Certified Chief Risk Officers in Australasia.