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The Heat Map

September 8, 2011 by
Filed under: General, Risk Management

Everywhere you look in risk management, you will find the heat map. A nice graphical overview showing impact and likelihood (or impact and frequency, and in some cases impact and preparedness). We need to be clear what the purpose of a heat map is and isn't. A heat map is a great tool to help determine priorities, create risk awareness throughout an organization, and help drive risk assessments.<>A heat map is not a tool to determine how big your risk is. Well, let's be more precise, it will give you an idea, but it will not give you a value. The problem is not the heat map, but the use of the heat map. To make a heat map practical in use for non-specialists, a heatmap typically has one 'DOT' for every risk. This implies a risk has a single impact and a single likelihood (frequency). This is fine to get an overview, but not to determine a value. To be more precise you would have to draw a line in the heat map (or add multiple dots). What is the likelihood ofsomething really bad happening (high impact) or that something less dramatic happens (low impact). But that makes the heat map much more difficult to interpret. You need something like a Monte Carlo simulation to determine values, but for most risk assessments this is several steps too far. It is simply beyond the purpose of the risk assessment: determine the priorities and focus.
So, it depends on the purpose of the heat map in how you use it. One dot or multiple dots can make a lot of difference. But note there is a very fine line here between 'being correct' and 'being understood'. Not a lot of people are able to cope with the complexity of statistics and simulations. First be understood, and then be correct ;-).

Tags: BWise, Risk, Risk Management

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