Philosophy

Appeal

Actuarial science

Construct (python library)

Variety (cybernetics)

Simplicity

Computer science

Risk analysis (engineering)

Business

Political science

Epistemology

Risk management

Artificial intelligence

Programming language

Finance

The risk matrix (RM) is a widely espoused approach to assess and analyze risks in the oil &amp; gas (O&amp;G) industry. 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? We have reviewed 30 SPE papers as well as several risk-management standards that illustrate and discuss the use of RMs in a variety of risk-management contexts, including HSE, financial, and inspection. These papers promote the use of RMs as a "best practice." Unfortunately, they do not discuss alternative methods or the pros and cons of using RMs. The perceived benefit of the RM is its intuitive appeal and simplicity. RMs are supposedly easy to construct, easy to explain, and easy to score. They even might appear authoritative and intellectually rigorous. Yet, the development of RMs has taken place completely isolated from academic research in decision making and risk management. This paper discusses and illustrates how RMs produce arbitrary decisions and risk-management actions. These problems cannot be overcome because they are inherent in the structure of RMs. In their place, we recommend that O&amp;G professionals rely on risk- and decision-analytic methods that rest on over 300 years of scientific thought and testing.

The Risk of Using Risk Matrices