Must read for all risk managers.
You may ignore the findings, but a must read nevertheless: The risk matrix (RM) is a widely espoused approach to assess and analyze risks. RMs have been implemented throughout that industry and are extensively used in risk-management contexts. This is evidenced by numerous SPE papers documenting RMs as the primary risk management tool. Yet, despite this extensive use, the key question remains to be addressed: Does the use of RMs guide us to make optimal (or even better) risk-management decisions?
Available from: https://www.researchgate.net/publication/266666768_The_Risk_of_Using_Risk_Matrices
Thomas, Philip & Bratvold, Reidar & Bickel, J. (2013). The Risk of Using Risk Matrices. SPE Economics & Management. 6. . 10.2118/166269-MS.
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This article reminded me of another unrelated article that I read recently. It talks about the persistence of ‘quackery’ and how even up to the early 1920s blood letting was still being recommended in medical textbooks.
As the article explains, the pull of intuitive thinking is extremely strong. Risk matrices provide a comforting illusion and probably ‘feel right’ for participants. They avoid troublesome issues like actually being able to validate your forecasts or compare them to what actually occurred, sidestep any real attempt at measurement, and are ‘easy’ as the require very little information or understanding to perform (back to the intuition point).
For those who are interested, the article on quackery is referenced below.
https://www.cambridge.org/core/services/aop-cambridge-core/content/view/803CF7F221CDD9480CC19149E3ACEF33/S0007125018000648a.pdf/weve-had-enough-of-experts-the-enduring-charm-of-quackery.pdf