Guest Post: Teaching Supply Chain Risk Management Through the Risk Matrix

Dr. Andy Hill and Dr. Rosie Cole are both Senior Lecturers at the University of Surrey in the UK.

Supply chain risk management (Chapter 11) is critical, but often difficult for students to grasp. Risks can range from supply delays and demand shocks to extreme events like pandemics. A risk matrix is a visual tool to help firms prioritize  and understand potential risks, and then make informed decisions about how to manage them. Plotting likelihood against impact offers a simple way to see these uncertainties. Its color-coded heatmap (see Module G) makes it an engaging teaching tool.

But risk matrices are riddled with three problems:(1) mathematical compression. Because the scales for likelihood and impact are simplified, rare but catastrophic events often get downplayed. The extremes are squeezed into narrow categories, which means the true scale of a severe event is not represented accurately; (2) presence of ambiguous categories. The labels “low,” “medium,” and “high” are not always clear-cut, and the boundaries between them often overlap. Different managers could look at the same scenario and classify the risk differently, leading to inconsistent decision- making; and (3) false objectivity. Many risk matrices attempt to turn qualitative judgements into numbers, for example by multiplying likelihood and impact scores. While this looks precise, the numbers are often arbitrary and can give a misleading sense of accuracy.

Here are two straightforward fixes for supply chain risk managers: (1) drop the semi-quantitative version and stick with qualitative categories: (2) align categories with probability–impact logic. Using orders of magnitude for likelihood and clearer thresholds for impact makes the tool more reliable. As a classroom exercise, you could ask students to critique a flawed risk matrix, or redesign one so categories are consistent and meaningful.

Perhaps the bigger lesson is that people, not algorithms, make decisions. Managers often rely on heuristics and intuition when assessing risk. This makes risk perception an important teaching point. Why do some managers ignore low-probability but catastrophic risks? How does education or experience shape perceptions? These questions move students beyond the tool itself into understanding decision-making behavior.

For teaching OM, the risk matrix remains a useful entry point into supply chain risk management. It should be framed not as a perfect solution, but as a way to sort risks into acceptable, unacceptable, and “needs more analysis.” Educators can use the risk matrix to teach critical thinking about tools, not just how to apply them.