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The Decision Factor offers insightful comments and observations on analytics—from views on new technology approaches and market dynamics to the latest industry trends driving demand for faster, smarter information analysis. This blog contains personal views, thoughts, and opinions from SAP employees, mentors, and friends working in the area of analytics. It’s not endorsed by SAP nor does it constitute an official communication of SAP.

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Myths in Risk Management — Exposing the Flaws of Risk Heat Maps

Risk Heat Map

Recently, I ran a round table discussion on the topic of enterprise risk management (ERM). The participants were all experienced risk managers in the private and public sectors. During a break, I overheard one participant sharing her experience in presenting a heat map to her board of directors as part of her ERM report. In her mind, the presentation was a disaster, and she decided to never again include a risk heat map as part of her presentation.

So what went wrong? Heat maps, like the one below, have been a staple of the risk management profession for years. For …