PMP® Exam Tip: Why do we use a Probability and Impact Matrix?

The probability and impact matrix sounds very complicated, but the concept is actually something that most people use in their everyday life quite frequently, although in a simpler form.

The probability and impact matrix comes into play when the project manager or team members determine that a particular phase or activity within the project contains a certain amount of risk. That risk needs to be quantified.

Each risk is given two sets of criteria which are then viewed on the probability and impact matrix. Each potential event is rated based on the likelihood that it will occur. It is also separately rated regarding how much of a problem would be created if it were to occur. The probability and impact matrix is used because it allows you to merge both of these components onto the same scale.

The matrix is used to review both sets of criteria at the same time. The result is that each potential risk can be designated as a low risk, a medium level risk or a high risk and then handled accordingly.

Now go ahead and open up your A Guide to the Project Management Body of Knowledge (PMBOK^® Guide) on page 331 and look at figure 11-10, which is an example of a probability impact matrix. The probability that a particular even will happen is shown along the left side of the chart and the degree of impact is shown along the bottom.

For example:
If the probability level was very low (.10) and the potential impact was also low (.10), the score on the matrix would be a .01.
If the probability level was medium (.50) and the potential impact was medium (.20), the score on the matrix would be .10.
If the probability level was higher (.70) and the potential impact was higher (.40), the score on the matrix would be .28.

The higher the matrix score, the higher the risk level associated with the item that is being analyzed.