The number of risks that organizations must manage has grown significantly over the past decade. A joint report by the AIPCA and North Carolina State University found that over 60% of executives are seeing a higher risk volume — and more complex risks — than ever before. In terms of IT security risks alone, there were over 200,000 Common Vulnerabilities and Exposures reported in 2025. To manage this deluge of risks effectively, enterprises must learn how to use risk prioritization in GRC or ERM frameworks.
What Is Risk Prioritization?
Risk prioritization is a management technique that categorizes risks by order of importance. The goal of this process is to focus on mitigating high-threat, urgent, or critical risks first, instead of getting distracted by smaller issues. Successful risk prioritization requires building a list of the risks your company faces, performing accurate and ongoing assessments, scoring the results, and implementing an action plan.
Which Risks Should You Prioritize?
There are several approaches your organization can take to risk prioritization. Some enterprises select different methods depending on the nature of the risk, project objectives, and tracked metrics for risk management.
Severity of Risks
One of the most common ways to assess risk priority is by severity. Severe risks have a major impact on your company’s financial health or operations. The damage can take many forms:
- Financial harm: Many risks can be expressed in monetary terms. Phishing attacks and fraud can cause literal theft of company funds.
- Regulatory violations: Compliance risks involving HIPAA, GDPR, PCI DSS, and other regulations should always have elevated priority.
- Expensive downtime: Ransomware attacks and vendor risks can paralyze your operations for hours, days, or longer.
- Data breaches: Data security risks can lead to exposure of private communications, loss of sensitive proprietary data, or devastating consumer data breaches.
- Reputational damage: Privacy violations and ESG risks can alienate your client base, leading to long-term sales losses.
- Lost clients: Customers are less likely to trust your organization after a data breach or supply-chain crisis.
The costs of cybersecurity risks alone can be staggering, reaching nearly $5 million per event on average. In industries like healthcare, that number jumps to almost $10 million per data breach.
Risk Proximity
You can also prioritize risks based on time sensitivity. Proximity refers to how close the risk event is to occurring. Some risks require immediate attention, either during the current project phase or in the next few days/weeks.
Natural disasters are one example of proximate risk. Imagine that your organization uses on-prem servers. If the location lies in the path of a hurricane or wildfire, you must take action to safeguard critical data and infrastructure immediately.
Mitigation Urgency
Even when risks aren’t due for a long time, you may only have a short window to correct the underlying issue. Structural problems in a data center may not affect your operations for several years, but once they occur, the costs of remediation skyrocket.
Giving priority to this type of risk and fixing issues before they get worse saves you money and improves your long-term profitability. On the other hand, risks related to annual compliance validations — still very important — may have lower priority compared to urgent tasks.
Risk Interconnectivity Factors
An accurate risk prioritization assessment should display how risks connect with each other. Some seemingly minor risks are actually critical because of the domino effect they can unleash. On the other hand, isolated risks, even moderate ones, may be less urgent to resolve.
Global businesses in particular need to consider risk interconnectivity. The complexity of supply chains means that small vendors can end up having a huge impact on enterprise operations, especially if there are also geopolitical, financial, and regulatory concerns at play.
Complexity of Risk Management
The complexity of risks can affect prioritization in two opposite ways. First, some organizations give greater priority to risks that are simple to correct — low-hanging fruit. This often makes financial sense, especially if risks will get more complicated to fix down the road.
Other companies view complex risks as more urgent because of the time, effort, and resources they require. If it takes a long time for your organization to perform risk assessments, design appropriate mitigations, get approvals, and implement corrective actions, you may need to follow this approach.
Operational Benefit
Risk mitigation efforts aren’t just about avoiding harm. Sometimes, the goal is to make compliance easier, enhance efficiency, and improve business operations.
By taking steps to reduce the risk of workplace accidents, you do more than ensure OSHA compliance. A safe work environment is also good for employee morale, boosting productivity and worker satisfaction.
In other words, when prioritizing risks, it makes sense to think in terms of return on investment. Both positives and negatives figure into ROI calculations.
How Does Risk Prioritization Work?
Accurately determining risk priority relies on data. The process begins with a thorough risk assessment.
Your Risk Appetite
Risk appetite is your organization’s attitude toward risk. Your viewpoint affects the scope of risk assessments and the way your company ranks threats.
Risk-averse businesses go to great lengths to avoid risk and act quickly when nonconformities appear. They perform extensive due diligence with suppliers, plan for emergent threats, and implement strict network security controls. Companies that need to follow regulatory or legal frameworks often follow this approach.
Risk-neutral organizations are more comfortable with some level of risk. They may not have to worry about HIPAA or GDPR penalties, so compliance focuses more on internal standards, quality, efficiency, and profitability. Risk decisions seek to balance good cybersecurity with productivity.
Very few enterprise-level organizations fall into the risk-seeking category. A risk-tolerant approach is more apt for venture capitalists with a “move fast and break things” mantra.
Risk Prioritization Formulas
You can use several methods to calculate risks. One of the most common formulas involves multiplying probability by impact. In this scenario, you would prioritize risk events that happen frequently (high probability) and cause significant damage (high impact).
For accuracy and clarity, use residual risk when determining the impact of risks. Residual risk factors in any preventative, avoidance, or risk mitigation controls you have in place or plan to implement.
Some risk management frameworks use more detailed formulas, such as the FAIR model. FAIR quantifies risks by defining threat event probability, system vulnerability scores, loss event frequency, and loss magnitude.
Risk Analysis Methods
Quantitative risk analysis offers more accuracy when evaluating risks for enterprises. Executives can see specific figures for potential losses and mitigation costs. A qualitative matrix is faster, but it relies on stakeholder opinions more than hard data.
Risk Severity Levels
Risk severity is the result of assigning probability and impact scores to a risk. There are generally five categories:
- Acceptable risk: Falls within your risk appetite or has a negligible effect
- Low risk: Currently poses minimal risk to your operations and is very unlikely to happen
- Moderate risk: Can happen and has the potential to cause noticeable problems or losses
- High risk: Is likely to happen or will have serious consequences for your company
- Severe or critical risk: Will almost certainly occur or will cause catastrophic damage to your finances, operations, customer relationships, or business existence
High and severe risks demand immediate action. Moderate risks are too important to ignore, but you have time to develop cost-effective solutions. Low risks can stay on the back burner for now.
How Do You Create a Risk Prioritization Matrix?
One of the best ways to determine risk priority is with a risk matrix — essentially a table that plots the distribution of detected risks. Here are two risk matrix examples you can use.
Simple Risk Matrix: 5×5
The higher the score, the higher the risk priority.
| 1: Minor | 2: Low | 3: Moderate | 4: High | 5: Severe | |
| 1: Rare | 1 | 2 | 3 | 4 | 5 |
| 2: Unlikely | 2 | 4 | 6 | 8 | 10 |
| 3: Possible | 3 | 6 | 9 | 12 | 15 |
| 4: Likely | 4 | 8 | 12 | 16 | 20 |
| 5: Very likely | 5 | 10 | 15 | 20 | 25 |
If you need greater precision, you can split each rank and create a 10×10 box, with 1 being “insignificant” and 10 being “catastrophic.”
Advanced Matrix: Custom Parameters
This table includes additional factors beyond likelihood and impact, ranking each on a scale of 1 (minor) to 5 (severe).
| Risk ID | Probability | Cost | Proximity | Compliance | Total |
| Ransomware attack | 3 | 4 | 2 | 3 | 12 |
| Vendor breach | 2 | 5 | 2 | 1 | 10 |
| HIPAA violation | 4 | 4 | 2 | 4 | 14 |
This model aligns well with organizational priorities and facilitates straightforward risk comparison.
Why Is Risk Prioritization Important?
Prioritizing risks improves your risk management program in many ways:
- Data-driven decisions: Accurate insights help you mitigate real threats, not remote possibilities.
- Optimized resource allocation: Prioritizing risk makes better use of personnel, time, capital, and technology.
- Compliance: Many regulatory frameworks require robust risk prioritization and management systems, including HIPAA, PCI DSS, and DFARS.
- Customer confidence: Addressing risks promptly and strategically strengthens client trust.
- Crisis management: Risk priority lists help you identify, track, and respond quickly to new threats and vulnerabilities.
These benefits apply to stakeholders, project teams, and your organization as a whole.
Improve Risk Prioritization With Automation Technology
Risk prioritization is important for SaaS developers, cloud providers, healthcare organizations, investment firms, and countless other enterprises. Automation platforms like Compyl streamline data gathering and make compliance monitoring simple. Discover a complete suite of risk management solutions today.
