House of Risk Model

House of Risk Model (HOR) is a systematic risk management methodology developed in Japan that integrates risk identification with causal analysis. Unlike traditional risk matrices that only assess probability and impact, HOR uses a Risk-Cause Matrix to identify root causes within a causal chain. This approach aligns with ISO 31000:2018's principles of risk assessment and COSO ERM 2017's emphasis on risk-adjusted decision-making. It allows enterprises to be proactive rather than reactive by identifying which risk factors drive multiple risk events, enabling more efficient resource allocation. The model is particularly effective in complex systems where risks are interconnected, such as manufacturing, finance, and information security.

The implementation of HOR typically follows four stages: 1. Risk Identification (identifying risk events and risk factors), 2. Risk-Cause Matrix Construction (quantifying the causal relationship between factors and events), 3. Risk Priority Number (RPN) Calculation (integrating probability, impact, and causality), and 4. Risk Mitigation Strategy Design. For example, a Taiwan-based electronics manufacturer implemented HOR to address supply chain disruptions. By identifying a critical dependency on a single-source component through the causal matrix, they prioritized supplier diversification and safety stock-building, reducing lead-time variability by 25% and improving service level compliance by 15%. This quantitative approach ensures that mitigation efforts are targeted where they provide the highest risk reduction per unit of investment.

Taiwan enterprises typically face three implementation challenges: 1. Subjective Bias in Causal Assessment: Experts may be inconsistent in assigning causal weights. This can be mitigated by using structured techniques like the Delphi Method or AI-assisted scoring. 2. Organizational Silos: Risk factors often span multiple departments, making it difficult to own the causal chain. Establishing a cross-functional Risk Management Committee is essential. 3. Resistance to Change: Traditional management may be skeptical of the RPN-based prioritization. Aligning HOR with existing KPIs and demonstrating the ROI of risk mitigation—such as reduced insurance premiums or improved credit ratings—is key to overcoming this resistance. A 90-day implementation roadmap is recommended to ensure sustainable adoption.

Winners Consulting Services Co., Ltd. specializes in House of Risk Model for Taiwan enterprises, delivering compliant management systems within 90 days. Free consultation: https://winners.com.tw/contact