The Risk Matrix

By Vinod Khosla on

Understand and quantify your major risks and know what you have to prove to get your product to market. 

General approach  

  • Quantify the level of risk in a technology
  • Ensure that all milestones are focused on reducing risk 
  • Identify milestones that are most important to reducing risk 
  • Communicate the reduction in risk relative to time and cost involved 

Steps taken:


Step 1: Identify major technical risk areas 

  • Identify and group critical technical risks or failure modes by product component
  • Groups of components also can have additional risks or failure modes  

  • Assign each risk a weighting factor on a scale of zero to 10, based on criticality and importance relative to component performance
  • The weighting factors represent the importance of when something goes wrong
  • Each component or component group also can be weighted relative to its importance to product success
  • Each failure mode represents a different way that a component can fail

Step 2: Assign an initial absolute level to each risk 

  • Assign an initial and absolute risk level, on a scale from zero to 100, based on your level of confidence in preventing the failure mode at a manufacturing level
  • The total initial level of risk of a component is the weighted average of the risk levels of the failure modes

Step 3: Lay out a milestone schedule

  • List major project milestones (from Gantt chart)
  • Each milestone is expected to reduce risk in one or more categories 


Step 4: Assign a level of risk reduction associated with successful completion of milestone

  • Lay out risks and milestones in a matrix
  • Each milestone reduces the risk of a particular failure mode by some percentage
  • When a milestone is achieved, the absolute risk associated with a component falls resulting in a reduction in the overall product risk (the average of all component risks)

Step 5: Track risk reduction relative to time and expenditures to show progress 

  • For any component (and for product risk), risk reduction can be plotted relative to time and milestones
  • Expenditures also may be plotted relative to time on the same charts

Single component risk reduction


Product risk reduction


Risk matrix example

Product risk reduction


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