Heat map Risk. Methodology and improvements

Risk mapping is a decision-making tool for decision-makers (members of the board of directors, as well as operational managers). Initially conceived as a tool to help steer insurance policies (insurable risks, non-insurable risks to be addressed by risk control elements), risk mapping has become a widely-used method for representing and formalizing risk-related thinking and decisions within organizations. In practice, risk mapping is as much an approach as it is one of the tools used to represent risk. It aims to define a process for identifying, assessing, prioritizing, treating and monitoring corporate risks, and, without claiming to be exhaustive, should enable the organization's decision-makers and experts to be made aware of their main risks. In addition, risk mapping should make it possible to define a risk appetite framework, i.e. the definition and formalization of a risk prioritization based on the acceptance or rejection of certain risks. This approach leads to the definition of the main risks to be addressed and monitored, such as those requiring priority action (insurance risk transfer, in-depth audit and control program, training plan), as well as the associated key risk management indicators.

The aim of this article is therefore to outline the uses and users of risk mapping, as well as to detail the methodologies used and the way in which they are applied, using industry examples and case studies. We discuss the key role of methods based on the frequency-cost approach, the transition from gross to net risk, and other alternative approaches to risk mapping. Finally, the article looks at best practices and pitfalls to be avoided in risk mapping, its use and maintenance over time.