How to Prepare a Risk Control Matrix: A Complete Guide

The success or failure of any business depends on its ability to evaluate and manage risk tolerance. Experts believe businesses worldwide will spend more than US$310 billion on security and risk management. Each business has a unique set of challenges, and an effective risk control matrix can help companies analyze their overall risk profile and make informed decisions. 

In this article, we will examine the basics of an appropriate risk control matrix, its benefits, and the challenges that business owners must be aware of. We will also understand how to prepare a risk control matrix using a stepwise approach. 

Before moving forward, let’s see what a risk control matrix is in detail.

What is a Risk Control Matrix?

A risk control matrix (RCM) is a powerful tool for evaluating potential risks against control measures. Some common risk types include financial, operational, regulatory, and other risks. The matrix typically has two axes:

• Likelihood: This rate determines how likely a particular risk is to occur within an organization. It can range from “rare” to “imminent.” 
• Impact (or severity: It indicates the severity of consequences that would affect the risk if it occurred within an organization. It can typically range from “very low” to “critical”.

Appropriate plotting of these two factors for each risk can help prioritize which needs organizational attention. RCM is a prominent tool that risk managers can use to make informed decisions and maintain communication within the risk management team. It is applicable to various categories, such as strategic, operational, financial, and compliance risks. 

Let’s understand the essential parts that define a risk control matrix. 

Essential Parts of a Risk Control Matrix

Understanding the fundamental parts of a risk control matrix is important when creating one. 

Here are some of the key elements of an RCM for your business processes:

• Control number: It is a critical component for cross-referencing purposes, and you can establish a reference number for the controls. 
• Process name: You can use high-level naming to define the processes within a matrix to make anyone within an organization aware of rankings. For example, accounts payable, revenue processes, and more. 
• Control Objective: It is a critical element necessary for documenting necessary paperwork outlining control mechanisms and their relevance. 
• Risk: It enables you to identify an event’s potential outcomes and what will happen during control failures.
• Frequency: Defines how many times a control should be carried out within a business process. 

Using a smart automation software solution for risk management makes it easier for businesses to carry out their business processes effortlessly. With VComply, you can streamline your risk management process, reducing the chances of data silos and making informed decisions.

Implementing a risk control matrix can be challenging. Let’s examine how a risk matrix works. 

Working on a Risk Matrix

Here’s how the risk matrix operates for evaluating the likelihood and impact of risks within an organization:

• The risk assessment matrix presents various risks in a chart. They are color-coded based on severity: high risks are in red, moderate risks are in yellow, and low risks are in green. Each risk matrix has two axes, one measuring the likelihood and one measuring the overall impact. 
• Likely risk events may have a chance of 61-90% chance of occurring, whereas highly unlikely events are rare and with less than 10%.  
• A risk matrix provides an overview of the threats by appropriately grading the likelihood and impact of each risk event. It allows compliance professionals to determine how to minimize threats that can affect business operations. 

Let’s explore the importance of a definitive risk control matrix for an organization. 

Importance of Risk Control Matrix

No matter the size of your organization, risk is an inevitable occurrence that needs your utmost attention. Ignoring risks can lead to detrimental outcomes for your organizational processes. Cyber risks are prominent nowadays, with 350 million individuals being affected by data breaches, outages, and external threats in 2023. Therefore, businesses use a risk control matrix to approach risk cohesively. 

Appropriate utilization of a risk control matrix can provide a way to evaluate the size and scope of your business risks. In addition, it can determine whether the approach to dealing with a particular risk is suitable. Moreover, you can also prioritize your risks and make it easier for your risk management team to understand with ease. 

Next, we have highlighted some of the benefits you can gather with a carefully designed risk control matrix. 

Benefits of Risk Control Matrix

Businesses can gain the upper hand with the appropriate use of well-crafted risk control matrices. 

Here are some benefits businesses can have with a risk control matrix:

• Enhanced risk visibility and management: A well-crafted RCM provides a clear overview of potential threats and enables enterprises to develop and establish control measures for such threats. 
• Better compliance: An appropriate RCM can also ensure compliance with specific regulations and standards, reducing the risk of fines and penalties. 
• Reduced inherent risks: An effective risk control matrix can minimize an organization’s intrinsic risks to an acceptable level. Overall, it improves the organization’s risk management framework and safeguards assets. 
• Informed decision-making: Risk control matrices provide a clear idea regarding the likelihood and impact of risks within an organization. It empowers risk managers to make informed decisions regarding resource allocation and risk mitigation measures within a business operation. 

An effective RCM can identify vulnerabilities within a specific risk management strategy. Moreover, it can also provide a structured approach to Third-party risk management (TPRM) to monitor risks effectively.

Also read: Understanding the Importance and Benefits of Risk Management for Business

Now, let’s understand the different levels of risk for a business. 

What are Level 1, Level 2, and Level 3 Risks?

1. Level 1 (Low Risk)

• These risks cause minimum harm and have a lower likelihood of occurrence with minor potential consequences. 
• They require minimum or no specific, actionable measures.

2. Level 2 (Moderate Risk)

• It signifies hazards that require attention for smooth business processes. 
• The consequences for such risks are moderate, and the likelihood of such risks is higher than level 1. 
• Proactive measures are needed to reduce the impact and likelihood of risks to acceptable levels. 

3. Level 3 (High Risk)

• It is an indication of significant harm and a higher likelihood of risk occurrences for a business. 
• It demands immediate and robust measures to reduce the impact of risks. 

Let’s explore five primary risk categories for organizations. 

What are the 5 Risk Categories?

Here’s a rundown of five categories of risks depending on their nature and impact on an organization:

1. Financial Risks

These risks drastically affect profit margins and a company’s overall ability to grow. Financial risks can occur when companies do not perform debt management or financial planning tasks. 

2. Operational Risks

Operational risks refer to potential threats associated with an organization’s day-to-day activities and processes. Some common types of organizational risks include human errors, business process failures, and supply chain disruptions. 

3. Strategic Risks

Strategic risks include potential threats common to an organisation’s strategic decisions, goals, and long-term planning. Such risks are also associated with strategic partnerships, innovation, and business strategy alignment. 

4. Regulatory Risks

Regulatory risks appear when changes in laws and regulations made by any Government or regulatory body can impact a business’s operation. 

5. Reputational Risks

Reputational risks are associated with negative public perceptions. They also include loss of trust among stakeholders and impact on media and public relations. 

Also read: Risk Management in Business: Best Practices and Trends for 2025

Let’s understand some of the common challenges for establishing an effective risk control matrix. 

Common Challenges in Risk Control Matrix

While establishing a risk control matrix, businesses may face issues that ultimately affect their overall effectiveness. 

Here, we outline some of the usual challenges along with strategies to address them effectively:

1. Resistance to Change

Adopting a new system can be challenging for both employees and management. In addition, internal and external business risks attributing toward resistance are major problems that affect businesses’ financial performance. Conducting educational sessions to highlight the benefits of risk control matrices with pilot programs can help ease the overall transition towards novel systems.

2. Data availability and quality

Inaccurate data can compromise the overall integrity of risk assessment processes. To develop a centralized database, organizations must establish robust data management policies and conduct regular audits for cross-verification. 

3. Resource limitation 

Another problem is the scarcity of resources; therefore, effectively prioritizing risks by focusing on critical ones is vital to ensure the best use of resources. 

4. Frequent updates

It is challenging to keep an RCM up-to-date with organizational changes and regulatory updates. An organization must set up a regular review schedule for the RCM by assigning a specific team and harnessing technological solutions for alerts to changes. 

Next, we have created a step-by-step plan to build a risk control matrix that can streamline your risk management process. 

Step-by-Step Process to Create a Risk Control Matrix

Typically, businesses can feel pressure to create a compelling risk matrix due to several uncertainties. However, implementing such a matrix requires only four steps, which are as follows:

Step 1: Identification of risks and controls 

Firstly, it is important to isolate the common risks that an organization faces. One of the best strategies is to identify all the major team members and stakeholders for brainstorming sessions. Risks within an organization can appear in different forms, and it is vital to categorize them into buckets like financial, strategic, external, and operational risks. 

Step 2: Determination of Risk Control

Upon successful risk identification, the next step is to establish risk controls. Types of risk controls include preventive, corrective, and detective controls. These controls enable organizations to reduce overall vulnerabilities for appropriate risk assessment. 

Step 3: Access the Risk

Depending on their risk criteria, organizations can use a scale from high risk to low risk. Some organizations may also use numerical representations to rank risk on a scale of 1-5, with 5 being extremely high and 1 being extremely low. 

Step 4: Assigning Ownership

The final step is to prioritize the risks after appropriately assessing their likelihood and impact on the risk level. However, risk management is a continuous process and requires constant monitoring and updates. 

Here’s a five-step process to monitor and update assigned risk ownership:

• Defining roles and responsibilities: Appropriate assignment of risk controls and defining expectations for monitoring, reporting, and taking action wherever needed.
• Setting performance metrics: Establishment of KPIs to track the efficacy of risk controls. 
• Conducting regular risk reviews: Scheduling routine risk assessment meetings to review existing risks and identify novel threats. 
• Implementing continuous improvement: It involves deploying a feedback loop to recommend improvements within existing risk controls and adopting strategies based on audit results and industry best practices. 
• Updating ownership: Updating assigned ownerships according to new risks is necessary to maintain the continuity of a risk control matrix. 

Developing a robust risk control matrix with a stepwise risk-based approach can improve business effectiveness and isolate risks that may hinder regular operations. 

Also read: A Step-by-step Guide for Implementing A Robust Risk Management Strategy: With Examples

Next, we will look at some emerging trends within risk management that are growing rapidly in 2025. 

Emerging Trends in Risk Management

Effective risk management is becoming an essential part of today’s businesses. 

Here are some emerging trends for risk management in 2025:

1. Artificial Intelligence (AI) and Machine Learning (ML)

• Both AI and ML are revolutionizing risk management with their advanced analytics capabilities. However, in a survey, 36% of respondents believe that building a governance framework for Gen AI tools for risk management is vital for the future. 
• The integration of AI within risk management is transforming the way businesses predict, analyze, and resolve vulnerabilities.

Read: Workplace AI Risks for Employers 

2. Advanced Cybersecurity

• The cost of data breaches is estimated to reach $5 trillion, growing 11% from 2023. 
• With enhanced digitalization and extensive use of interconnected systems, innovative cybersecurity strategies are emerging as crucial elements of risk management. 

3. Digital Risk Management

• It is a process of identifying and assessing risks that are associated with an organization’s digital operations. 
• Modern businesses are increasingly improving their cybersecurity and enhancing the decision-making capabilities of risk managers to maintain business performance. 

Take control of your Risk Operations with VComply RiskOps

VComply’s Risk Management solutions offer cutting-edge solutions for businesses to streamline their risk management tasks and increase efficiency. 

Key features of VComply include:

• Interactive dashboard for making strategic decisions and visualizing risk exposure patterns through heatmaps to gain valuable insights into threats. 
• VComply’s proactive notifications and alerts can address risks in a timely manner. 
• VComply’s recommendation plans to modify controls and monitor the status of implemented actions for appropriate risk assessment is a highlighting feature. 
• It offers real-time transparency to monitor risks and allows risk managers to make informed decisions. 

Schedule a free demo to gain a deep understanding of how VComply can transform your risk operations. 

Conclusion

The future of risk management relies on the effective use of automated software and proactive decision-making approaches. Using an effective risk control matrix is no longer an afterthought for organizations. 

A carefully designed risk control matrix allows organizations to effortlessly identify, evaluate, and reduce the chances of risk occurrences. It can also enable businesses to balance compliance with security while focusing on real-world threats that need immediate attention. 

Experience the benefits of an automated risk management approach with VComply’s 21-day free trial for streamlining your risk operations with automated workflow and enhanced accuracy.