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A fuzzy mapping framework for risk aggregation based on risk matrices

Article in Journal of Risk Research · May 2018

DOI: 10.1080/13669877.2016.1223161

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Journal of Risk Research, 2016
http://dx.doi.org/10.1080/13669877.2016.1223161

A fuzzy mapping framework for risk aggregation based on risk

matrices
Chunbing Baoa,b , Jianping Lia and Dengsheng Wua*
a
Institute of Policy and Management, Chinese Academy of Sciences, Beijing, China;
b
University of Chinese Academy of Sciences, Beijing, China
(Received 26 January 2016; final version received 12 July 2016)

Extant research has focused upon assessing individual risks with the aid of risk
matrices. Although risk aggregation is an important issue in risk management,
aggregation of risks measured by risk matrices remains unresolved despite the
wide usage of risk matrices. This paper proposes a framework to resolve the
problem. We start from modifying the two notions of non-aggregatability of risk
matrices, namely, qualitative description of inputs and non-comparability of dif-
ferent types of consequences. Then, we explicate the strong connection between
risk matrices and fuzzy sets and propose that the transformation from risk matri-
ces to fuzzy sets clear some confusions encountered in the aggregation process.
A framework which covers membership analysis, composing different risk and
defuzzification of the aggregated membership function, is proposed to aggregate
different risks. In the framework, we pay maximum attention to accurate estima-
tion of memberships of different risks. Besides, technical problems of composi-
tion and defuzzification are solved in detail. At last, an illustrative example is
presented to show the feasibility of our method where we report the ranking of
the aggregated risks of different scenarios.
Keywords: risk matrices; risk aggregation; qualitative risk analysis; fuzzy set

1. Introduction
A risk matrix is a qualitative risk assessment tool that rates the risk according to two
most adopted criteria, namely, consequence and likelihood or other similar
expressions like severity and probability and so on (Ale, Burnap, and Slater 2015;
Anthony Tony Cox 2008; Duijm 2015). To estimate the severity of a risk by
employing risk matrix, decision-makers need to estimate the consequence and likeli-
hood of the risk occurring only subjectively and the risk matrix outputs the risk rat-
ing, denoted by a particular color, like red, yellow, green, and so on. Due to its
simplicity and low reliance on data, the risk matrix has been widely used in many
fields such as agricultural pollution management (Hewett et al. 2004), a safety
management system (Cook 2008), and so on.
Some technical drawbacks, such as inconsistency (Anthony Tony Cox 2008),
range compression (Anthony Tony Cox 2008; Levine 2012), and spurious resolution
(Anthony Tony Cox 2008), highlight the inability of risk matrices to handle
uncertainties because of input data bias (Budescu, Broomell, and Por 2009;

*Corresponding author. Email: wds@casipm.ac.cn

© 2016 Informa UK Limited, trading as Taylor & Francis Group

2 C. Bao et al.

Department of Defense 2012; Smith, Siefert, and Drain 2009), risk preference
(Bedford 2013; Wall 2011), and ranking cells (grids) (Anthony Tony Cox 2008;
Duijm 2015). Although there are some standards for estimating likelihood and con-
sequence when using a risk matrix (IEC 2009), we acknowledge that risk matrices
essentially rely on subjective perceptions. Confusing though this characteristic is,
risk matrices work effectively in vague environments where data are not sufficient
for quantitative tools. We consider subjectivity as an essential characteristic of risk
matrices since it is a qualitative risk management tool.
Despite the technical drawbacks, risk matrices are used widely. However, all
applications measure or rank different individual risks, instead of aggregating them.
In practice, an investment or a task usually contains several risks and decision-
makers need to consider the overall risk rather than individual risks (Acharya,
Almeida, and Campello 2013; Bernard, Jiang, and Wang 2014; Kouvelis et al.
2012). However, to the best of our knowledge, extant literature on aggregation of
risk matrices is sparse. Some issues that hinder aggregation of risk matrices are:
(1) a risk matrix is essentially a qualitative tool and thus ratings of risks are often
described only qualitatively, which makes it difficult to compare aggregated risks of
different scenarios (a scenario means a case where each risk considered has a partic-
ular rating). For example, it is difficult to say how many low risks are equivalent to
a medium one. Also, (2) consequences of different types of risks are usually differ-
ent and cannot be compared, such as the consequences of economic loss, casualties,
and so on (Duijm 2015). As a result, ISO (IEC 2009) states that ‘risks cannot be
aggregated.’ So, the purpose of this paper is to explore how to aggregate individual
risks. Since a particular risk is measured by a predesigned risk matrix, the concept
of ‘aggregating risk matrices’ is substituted for ‘aggregating individual risks mea-
sured by risk matrices’ for simplicity (Duijm 2015; IEC 2009).
We start our work from overcoming some obstacles of aggregating risk matrices.
The first issue emanates from recognizing that risk matrices are totally qualitative.
However, even in a qualitative risk matrix, decision-makers do not classify conse-
quence or likelihood into a particular rating arbitrarily. They do so based on the cog-
nitive criterion that relies on experience or knowledge. The quantitative risk matrix
is a tool that lists the criterion, namely, axes of consequence and likelihood are
quantitatively divided into several intervals and each interval corresponds to a rating.
In fact, many researchers have suggested the use of quantitative risk matrix for
semi-quantitative or quantitative analysis (Anthony Tony Cox 2008; Duijm 2015;
Levine 2012; Ni, Chen, and Chen 2010; Ruan, Yin, and Frangopol 2015). As a
result, quantitative risk matrices are adopted in this paper to deal with the first issue.
Based on the quantitative descriptions of inputs, we normalize the consequences so
that different dimensionalities can be compared in terms of relative magnitudes.
Markowski et al. indicated that a risk matrix can be seen as a collection of some
fuzzy sets (Duijm 2015; Markowski and Mannan 2008). We consider the transfor-
mation from risk matrices to fuzzy sets as a crucial step for aggregating risk matri-
ces. Specifically, a normative framework is proposed, which consists of membership
analysis, composition, and defuzzification. Of all the techniques, we mainly examine
how to obtain a membership function of a certain risk rating in a risk matrix, which
is the basis for other steps. We refute the common assumption that membership
functions are trapezoidal or triangular (Ferdous et al. 2011; Rezaei, Monjezi, and
Varjani 2011; Zadeh 1975), since the final results are biased. Furthermore, we intro-
duce a method to get the exact membership of each risk rating, which is applicable
 Journal of Risk Research 3

for all forms of risk matrices. Afterward, aggregation is performed with the aid of
Monte Carlo simulation, after which each situation with different risks is assigned a
particular fuzzy set. Defuzzification then transforms the fuzzy numbers into some
crisp values representing the magnitude of risk aggregation under different scenarios.
The final ranking of crisp risk values reflects the relative severity of a scenario
where different risks are aggregated.

2. Aggregatability of risk matrices

The notion of non-aggregatability of risk matrices holds with the support of two
main pieces of evidence: (1) incomparability of different risk ratings with qualitative
analysis; and (2) incomparability of different types of risk. Notice that we can dis-
criminate individual risks and some risk scenarios distinctly by qualitative descrip-
tions, for example, a high risk is more severe than a low risk and a scenario with
three high risks is more severe than a scenario with three low risks. However, we
seem unable to differentiate whether a scenario with a high risk and a low risk
implies greater risk than a scenario with two medium risks. The doubt emanates
from the lack of quantitative analysis. The second piece of evidence is easy to
understand. For different risks, the consequences are expressed in different units and
therefore these risks cannot be aggregated. Reasonable though these two pieces of
evidence are, we do think they constitute one-sided views. In this section, we show
that the views are no longer tenable, after some slight improvement.

2.1. Use of quantitative risk matrices

Risk matrices are tables that map two inputs to risk priority levels (Anthony Tony
Cox 2008). This means there are two main members of a risk matrix, namely, two
risk criteria (usually ‘consequence’ and ‘likelihood’) and risk ratings (distinguished
by colors such as ‘green,’ ‘yellow,’ ‘red,’ and so on). Usually, once a risk matrix is
given, the mapping, i.e. ratings with different inputs, is determined. In this sense, we
focus on the inputs when analyzing different kinds of risk matrices.
High

G Y R
Likelihood
Medium

G Y Y
Low

G G G

Low Medium High

Consequence

Figure 1. A 3 × 3 risk matrix with inputs qualitatively described.

4 C. Bao et al.

Since risk matrices are employed under uncertain environments, verbal qualita-
tive descriptions are assigned to different ratings of inputs. In Figure 1, consequence
and likelihood are qualitatively described as ‘Low,’ ‘Medium,’ and ‘High.’ How-
ever, if ratings of inputs are described so, mathematical operations of risk matrices
may become very difficult. For example, if three 3 × 3 risk matrices are aggregated,
‘Green (L+L) + Green (L+L) + Green (L+L),’ where the output of consequence
‘Low’ and likelihood ‘Low,’ denoted by ‘L+L’ and so on, is the lowest risk
aggregation situation. Then which of the two scenarios, one with three risk
ratings ‘Green + Yellow + Red’ and the other scenario with three risk ratings
‘Yellow + Yellow + Yellow,’ should have a higher priority? Obviously, it is impossi-
ble to solve this problem under such settings. And this is why ISO (IEC 2009)
claims non-aggregatability of risks assessed by risk matrices.
Semi-quantitative descriptions of inputs slightly modify the drawbacks of
qualitative ratings. By assigning each linguistic description a number, the magnitude
of each cell is quantified according to the corresponding scores (Figure 2). However,
such ordinal scales do have problems, despite being simple and conducive to
some quantitative comparisons between cells (Hubbard and Evans 2010). The
predominant problem is that difference between the ordinals cannot reflect the true
distance between the corresponding input ratings. For example, Mil-Std 882d gives
objective descriptions for consequence: damage costing $2K–$10K is ‘negligible’;
$10K–$200K is ‘marginal’; $200K–1M is ‘critical’; and damage costing more than
$1 M is ‘catastrophic’ (Department of Defense 2012). Obviously, ordinals ‘1–4’
assigned to the four ratings are not proportionate to thresholds ‘2K, 10K, 200K, and
1M’ and as a result, aggregation of different risks based on scores achieved by mul-
tiplying these ordinals will either overestimate or underestimate the overall risk.
Different from semi-quantitative descriptions that assign each rating a discrete
ordinal, quantitative descriptions of inputs assign each rating an interval which is a
numerical range (Figure 3). Quantitative descriptions have standards according to
which a particular consequence or likelihood should belong to a certain rating and
therefore reduce the impact of subjective judgment, which makes mathematical
operations on risk matrices possible. As a result, Cox designed rating schemes of
risk matrices based on such a setting (Anthony Tony Cox 2008); quantitative
High

3 6 9
3
Likelihood

Medium

2 4 6
2
Low

1 2 3
1

Low Medium High

1 2 3
Consequence

Figure 2. A 3 × 3 risk matrix with inputs semi-qualitatively described.

 Journal of Risk Research 5

1
High
G Y R

2/3
Likelihood
Medium
G Y Y

1/3
Low
G G G

0
0 1/3 2/3 1
Low Medium High
Consequence

Figure 3. A 3 × 3 risk matrix with inputs quantitatively described.

descriptions of inputs have been adopted in many other works also (Levine 2012;
Markowski and Mannan 2008; Ruan, Yin, and Frangopol 2015).
Remark 1: Non-additivity of qualitatively described risks supports non-aggregata-
bility of risks measured by risk matrices. Although we consider a risk matrix as a
qualitative tool essentially, we think previously assigned quantitative ratings
described by a numerical interval to consequence and likelihood deal with the prob-
lem well. To see how to obtain a quantitative risk matrix, one may refer to Ruan
et al. (Ruan, Yin, and Frangopol 2015). In this paper, we assume that quantitative
risk matrices used to assess different risks are formulated in advance.

2.2. Dealing with different types of consequences by normalization

In risk matrices, risks are measured by the product of consequence and likelihood
which denotes the expected loss (Ale, Burnap, and Slater 2015; Anthony Tony Cox
2008). However, forms of ‘loss’ (consequence) vary in practice, such as economic
losses, casualties, schedule delay, and so on. Dimensions of these losses are differ-
ent, which is the second main reason that supports the notion of non-aggregatability
of different risks measured by risk matrices.
A risk matrix is essentially a qualitative tool and all ratings of consequences are
described qualitatively, by words. Therefore, decision-makers use it to obtain the rel-
ative severity of a risk, instead of the magnitude, irrespective of the dimension of
the consequence (Anthony Tony Cox 2008; Ni, Chen, and Chen 2010). As a result,
normalizing the quantitative descriptions of consequences suggested above, from 0
to 1, makes the relative severities of different consequences comparable and even
aggregatable (Čokorilo, De Luca, and Dell’Acqua 2014). Evidence supporting our
idea of aggregatability of different types of consequences comes from multiple attri-
butes decision-making (MADM) (Wan and Li 2013; Zhang and Yu 2012). In
MADM, attributes of an object are usually multidimensional and after normalizing
the attributes, we can compute the aggregated magnitude of the objective. The simi-
larity between MADM and our method is that the goal is to rank these objectives
(i.e. obtain their relative magnitudes instead of accurate measures). At last, since
‘likelihood’ does not need to be normalized (its value is usually between 0 and 1),
different expected losses can be estimated mathematically.
6 C. Bao et al.

It is common that an extreme rating of consequence is described with the interval

[m, + ∞). In this case, any scenario of an extreme rating has the highest priority
and thus is not considered in the process of aggregation, for simplicity. The highest
value of consequence is then set to be m based on which normalization is
performed.
Remark 2: Normalizing different dimensions of different consequences is an effec-
tive way to overcome the barriers that prevent aggregation of risks measured by risk
matrices, irrespective of whether consequences of different risks have the same
dimensions or not.
However, there is another problem when aggregating risks using risk matrices.
Each rating is described by a numerical interval instead of a particular value. There-
fore, expected loss of a risk is located in an interval. This makes it difficult to aggre-
gate risks. To solve the problem, the fuzzy set is employed, which is introduced in
the next section.

3. Similarities between risk matrices and fuzzy sets

The fuzzy set theory was introduced by Zadeh (1965). It works effectively in impre-
cise and vague environments, especially when there are many subjective judgments.
Let X = {x} be a space of objectives, then a fuzzy set A in X can be described by a
membership function μA(x), where μA(x) ∈ [0, 1] represents the ‘grade of member-
ship’ of x in A. The larger the μA(x), the higher the grade of membership of x in A
(Zadeh 1965). In applications, membership functions are usually assumed to be
trapezoidal (Ferdous et al. 2011; John et al. 2014; Mentes et al. 2015), as shown in
Figure 4.
The corresponding equation of trapezoidal membership function of fuzzy set 1 in
Figure 4 is:
8
> 0; x\a1 ;
>
> 
>
> x a1
>
> ; a1  x  a2 ;
< a2  a1
lset1 ðxÞ ¼ 1; a2  x  a3 ;
>
> x  a4
>
> ; a3  x  a4
>
>
: a3  a4
>
0; x [ a4 :
Similar to the fuzzy sets, risk matrices are used in vague environments where
there are no precise data of consequence and likelihood. Descriptions of the two cri-
teria rely on decision-makers’ subjective judgment. For example, for a particular

Figure 4. A sample of trapezoidal membership function.

 Journal of Risk Research 7

risk, decision-makers can only judge values of consequence and likelihood within
certain intervals instead of assigning them precise values.
Besides, fuzzy sets can translate several unstructured linguistic terms into a struc-
tured one with fuzzy ‘if-then’ rule (Mamdani and Assilian 1975; Rezaei, Monjezi,
and Varjani 2011):
If X1 is A1i ; . . .; and Xn is Ani ; then Y is Bi for i ¼ 1; 2; . . . ; K;
where {Xj} are input variables; Aji is the linguistic term of variable Xj in rule i; Y is
output variable; Bi is linguistic term of variable Y in rule i and K is the number of
rules.
Fuzzy ‘if-then’ rules play an important part in the application of fuzzy logic.
Similarly, mapping two inputs to a risk rating in risk matrices is based on such an
‘if-then’ rule. For example, in Figure 3, there are in all nine rules, one of which is if
the consequence is ‘medium’ and the likelihood is ‘medium,’ then risk rating is ‘yel-
low.’ Usually, when a risk matrix is given, the ‘if-then’ rules are determined. More
specifically, in a risk matrix, the set of all possible risks (risks here refer to infinite
points in a risk matrix) is a space of objectives. A fuzzy set consists of all points
located in a risk rating cell (e.g. red cell in Figure 3), which means decision-makers
think these quantitative risks belong to this risk rating.
However, a point locating in a cell does not necessarily mean that other points
with the same quantitative risk belong to the same cell. This is because risk in a
quantitative risk matrix is measured by the product of consequence and likelihood
(Anthony Tony Cox 2008) and points on an ISO-risk contour passing through differ-
ent cells are quantitatively equivalent.
To visually explain where the uncertainty of a risk value belonging to a risk
rating comes from, we take the 3 × 3 risk matrix (this risk matrix is designed accord-
ing to Cox’s three axioms (Anthony Tony Cox 2008)) as shown in Figure 5. Four
ISO-risk contours passing through the highest and lowest points of each risk rating

Figure 5. A 3 × 3 risk matrix divided by four ISO-risk contours.

8 C. Bao et al.

are drawn on the risk matrix. The dashed area in Figure 5 represents shared parts of
two adjacent ratings, which means in such a region, a quantitative risk may belong
to two ratings. We call the points in the dashed area abnormal risk points and those
in the remaining part of the cell the normal risk points. Therefore, there are five dif-
ferent area ratings, namely, decisively rated green (I), ambiguously rated green and
yellow (II), decisively rated yellow (III), ambiguously rated yellow and red (IV), and
decisively rated red (V). Table 1 reports the area proportion (AP) of each cell.
Each cell with ith rating of consequence and jth rating of likelihood in Table 1 is
denoted by Cij. We see from Figure 4 that in most of the cells, only a part of it
belongs to a determined rating and the remaining belongs to ambiguous rating or
ratings. The ambiguous ratings correspond to the cross section of two fuzzy sets in
Figure 4 and this explains where the uncertainty of a risk belonging to a risk rating
comes from.
Based on the above analysis, we claim that risk matrix can be treated as a partic-
ular form of a collection of fuzzy sets. By such transformation, we may make use of
some mature techniques of fuzzy sets to aggregate risk matrices. We consider the
transformation from risk matrix to fuzzy set an essential step for aggregation of risk.

4. A normative framework to aggregate risks based on risk matrices

The purpose of our research is to answer questions such as which of the two scenar-
ios has larger risk, i.e. a scenario with ‘medium risk + medium risk’ or a scenario
with ‘low risk + high risk,’ what the relative severity of a scenario is, how many
low risks are equivalent to a high risk, and so on. The idea and technical details are
depicted in Figure 6.
First, the normalized quantitative risk matrices by which risks are measured are
formed by decision-makers (or by experts). Then, membership analysis of all risk
ratings is done to obtain membership functions of these ratings. We emphasize that
membership analysis is the most important step in the framework for it promises the
required accuracy for further operations. As a result, we focus on explaining how to
achieve these membership functions. Besides, a composition method is adopted
to aggregate different risks based on membership functions. Defuzzification is used
to obtain crisp values of the fuzzy numbers of all scenarios. At last, the ranking of
all scenarios can be made based on these crisp values. To estimate the risk of a sce-
nario in practice, decision-makers need only obtain a rating of each risk by provid-
ing judgments on consequence and likelihood. The relative magnitude is estimated
by inquiring the ranking of this scenario in all possible scenarios. In the following,
we introduce the steps in detail.

4.1. Fuzzy membership in risk matrices

4.1.1. Necessity of studying fuzzy membership
As stated before, fuzzy membership reflects the degree of a risk in a rating. In a risk
matrix, a point presents the magnitude of a risk. However, some points with the
same magnitude are located in different risk ratings and some with different magni-
tude are in the same risk rating. Membership here is adopted to give the degree of a
point belonging to a risk rating.
Table 1. Area proportion of each cell in a 3 × 3 risk matrix.
Cell No. C11 C21 C31 C12 C22 C32 C13 C23 C33
Figure

AP of I (%) 100 69.31 40.55 69.31 0 0 40.55 0 0

AP of II (%) 0 30.69 59.45 30.69 86 21.64 59.45 21.64 0
AP of III (%) 0 0 0 0 14 40.55 0 40.55 0
AP of IV (%) 0 0 0 0 0 37.81 0 37.81 43.28
AP of V (%) 0 0 0 0 0 0 0 0 56.72
Journal of Risk Research
9
10 C. Bao et al.

Figure 6. Framework of risk aggregation based on risk matrix.

In sum, two kinds of points cover a risk matrix: normal and abnormal. The for-
mer refers to quantitatively equivalent points assembling in the same risk rating and
the latter in different risk ratings. As shown in Table 1, even if these abnormal
points can be classified into any of the two adjacent ratings, a question of interest is
what their respective degrees of membership in the two ratings are. Membership
coincidentally reflects a risk rating’s vagueness. Whether vagueness exists in all risk
matrices where risk is measured by the product of consequence and likelihood needs
to be established. As explained in Section 3, ISO-risk contours are determined in a
risk matrix and thus vagueness of a rating depends on which cells belong to the
rating, namely, the color scheme of the risk matrix. In summary, vagueness is inevi-
table in risk matrices, which is based on the following proposition.
Proposition 1: Degrees of membership of points in the same rated cells in a risk
matrix cannot be all 1.
Proof: First, it is obvious that there must be two adjacent (upper–lower or left–right)
cells that are differently rated. Otherwise, there will be only one rating, which is
meaningless for a risk matrix. What’s more, there must be infinite ISO-risk contours
(Figure 5) passing through any two adjacent cells. If an ISO-risk contour passes
through two differently rated cells, it means that there are quantitatively equivalent
risks belonging to two ratings at a different degree of membership, which implies
the degree of membership of the corresponding quantitative risk in a rating is not 1.
Proposition 1 explicates the necessity of studying membership in risk matrix
since one cannot be certain that a specific risk belongs to a particular risk rating. As
shown in Figure 5, we first draw ISO-risk contours of the lowest and the highest
 Journal of Risk Research 11

risks of each rating. Then, according to these ISO-risk contours of thresholds, the
degree of membership of each rating is analyzed. For a rating A, the degree of mem-
bership for different risks varies. For example, in Figure 5, the degree of member-
ship of risks from 1/9 to 1/3 in rating Y increases from 0 to 1; the degree of
membership of risks from 1/3 to 4/9 in Y is 1; the degree of membership of risks
from 4/9 to 2/3 in Y decreases from 1 to 0.
Based on the above analysis, the following definition is proposed:
Definition 1. Risks are located in two kinds of intervals: overlapping and non-over-
lapping. The former interval consists of a series of continuous risks whose degrees
of membership are less than 1 and the latter 1.
At the end of this section, we argue whether we should consider cells with the
same rating as a whole or as individual cells. Design of a risk matrix classifies sev-
eral cells into the same rating because there is no significant difference between the
cells. Of course, no two cells can be the same since in theory, they have different
consequences and likelihoods. However, if we consider every cell as a characteristic
individual and consider aggregating all possible scenarios, on the one hand, we vio-
late the original intention of using a risk matrix where several different cells are
approximatly classified in the same rating and on the other hand, such operation will
cause oversized resolution of a risk matrix and thus calculation will be cumbersome.
As a result, we only consider the rating of a risk, for example, Y in Figure 5, and do
not consider the input combination of this rating, i.e. we do not care whether Y is
the output of consequence ‘Medium’ and likelihood ‘High’ or consequence ‘High’
and likelihood ‘Medium.’

4.1.2. Measure and property of fuzzy membership function

Another problem about the degree of membership is how the degree changes between
0 and 1? This is decided by membership functions. Membership functions are
assumed to be trapezoidal in shape, as shown in Figure 4 (Ferdous et al. 2011; John
et al. 2014; Mentes et al. 2015). As a result, under this assumption, the corresponding
membership function of a risk matrix shown in Figure 3 can be drawn as Figure 7.

Figure 7. Trapezoidal membership function of a 3 × 3 risk matrix.

12 C. Bao et al.

Obviously, if a trapezoidal membership function is adopted, the degree of

membership is assumed to increase or decrease linearly.
To check the truth of this assumption, we should first find a rational way to cal-
culate membership. As shown in Figure 8, on an abnormal contour (it passes
through two or more differently rated regions), different points belong to different
risk ratings. Intuitively, the length of the ISO-risk contour located in the region with
a certain risk rating brings some information about the degree to which the corre-
sponding quantitative risk belongs to the particular rating. Further, the ratio of length
of the partial contour to the overall length of this contour can be used to measure
the degree of membership of a risk in a rating, namely:
Lrisk; A
lA ðriskÞ ¼ ; (1)
Lrisk

where Lrisk, A denotes the length of the contour with quantitative value risk located
in the region whose risk rating is A and Lrisk denotes the total length of this contour.
In detail, length of a curve can be calculated according to the following integral
formula:
Z x2 Z x2 Z x2 pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi Z x2 pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
dx
L¼ dl ¼ ¼ 1 þ tan hdx ¼ 2 1 þ f 02 ðxÞdx
x1 cos h
x1 sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi x1 x1
Z x2
risk 2
¼ 1 þ 4 dx; (2)
x1 x

Figure 8. Membership of risks on an ISO-risk contour.

 Journal of Risk Research 13

where x is the input variable corresponding to the consequence in a risk matrix and
f (x) is the output corresponding to the likelihood, namely, f ðxÞ ¼ risk x ; θ is the slant
angle of the curve in an infinite small triangle during the integration process.
The length in Formula (2) cannot be evaluated by the Fundamental Theorem of
Calculus because there are no elementary antiderivatives of the integrand. To obtain
the result, an approximation algorithm, the trapezoidal rule, is employed. The length
of a curve can be approximately calculated as follows (Yeh and Kwan 1978):
Z b
ba
f ðxÞdx  ðf ðx0 Þ þ 2f ðx1 Þ þ    þ 2f ðxn1 Þ þ f ðxn ÞÞ; (3)
a 2n
where n is the number of subintervals of [a, b] and xi ¼ a þ i ban ði ¼ 0; 2;    nÞ.
According to the above method, for an abnormal quantitative risk, if segments
consisting of points having the same risk are piecewise, i.e. cells with the same rat-
ing through which the contour passes are not adjacent, membership of a risk in the
rating can be calculated by the ratio of the length of these segments to the length of
the overall contour. Besides, in a risk matrix, a particular risk may belong to several
(more than 2) risk ratings, which depends on the design scheme of the risk matrix.
Now, we return to the question whether the degree of membership increases or
decreases linearly? The following proposition provides the answer.
Proposition 2. The membership function of risks in the overlapping part of two
ratings is not linear if a risk is assessed by the default measure, namely, risk =
frequency × consequence.
If the degree of membership of risks located in an interval increases or decreases
linearly, then degrees of membership of starting, middle, and ending points of the
interval will be on the same line. However, according to our method, it is easy to
check that these three degrees are not on the same line and this proves the truth of
our statement.
We claim that membership functions of a risk in a rating are different in different
risk matrices, which comprises the following proposition.
Proposition 3. The membership function of a risk in a rating is determined by the
design of the risk matrix, namely, how different ratings are assigned to different cells
in the risk matrix.
A risk matrix is essentially a qualitative risk assessment tool and decision-makers
have their own perceptions of the rating of a risk. Their designs of the risk matrices
determine their perceptions of the degree to which a risk belongs to a rating. In this
paper, we do not impose any assumption on the design of the risk matrices for the
sake of universality of our method.
One may question why we should adopt the method we have introduced to
achieve the degree of membership instead of accepting the assumption that the
membership function is trapezoidal. We claim that there are two main reasons, as
follows:

(1) Trapezoidal membership function results in a biased estimation of the

aggregated risk and thus is not accurate;
(2) The assumption method is not applicable where the membership function
does not change between 0 and 1, while our method for measuring the mem-
bership function is more universal.
14 C. Bao et al.

To explain the reason (1), we first give two kinds of membership functions of a
risk in risk rating Y (Figure 9). The blue outline is drawn according to our method
and the red outline is a trapezoid as the assumption described before. One may see
that when the membership function increases from 0 to 1, it is convex and when the
membership function decreases from 1 to 0, it is concave. Due to the complexity of
Formula (1), without strict mathematical proof, with the aid of computer, we report
the second derivative of the membership function with respect to risk in the two
overlapping parts in Figure 10.
Figure 10 shows that in the increasing part of membership, the second-order
derivative is greater than 0 and smaller than 0 in the decreasing part, which supports
our conjecture. We argue that the conjecture is not dispensable. First of all, it
describes the shape of the membership function and refutes the assumption that the
membership function of risks in overlapping intervals is linear. Moreover, it gives
the following important property.
Property of the membership of risks in different ratings in a 3 × 3 risk matrix
as shown in Figure 3: The membership functions of risks in different ratings G, Y,
and R are asymmetric.
Notice that when the fuzzy set is used, we should employ defuzzification to
obtain the crisp value of a fuzzy set that represents its magnitude. If the centroid
method (a common defuzzification method) is used, results of a trapezoidal member-
ship function and the asymmetric membership function must be different. Compared
with the centroid of the trapezoidal membership function, the exact centroid of the
membership function shifts to the right, which affects the accuracy of further opera-
tions. That is why we should first obtain the precise function of the membership.
We illustrate the second reason with Figure 11. A fictitious 3 × 3 risk matrix on
the left of the figure is constructed. It is an arbitrary risk matrix and we do not
assume the accuracy of its design. With our method, we present the outline of the
membership functions on the right of Figure 11.

0.9

0.8

0.7

0.6
Membership

0.5

0.4

0.3

0.2

0.1

0
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Risk

Figure 9. Membership of risk in rating Y.

 Journal of Risk Research 15

30

Second order derivative of membership 20

10

-10

-20

-30

-40

-50
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Risk

Figure 10. The second derivative of membership with respect to risk.

1
1

0.9
High

G Y R
0.8

0.7
2/3

Membership
Likelihood

0.6
Medium

G Y R 0.5

0.4
1/3

0.3
Low

G G R 0.2

0.1
0

0 0
1/3 2/3 1 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Low Medium High
Consequence Risk

Figure 11. A fictitious 3 × 3 risk matrix and the corresponding membership functions
achieved by our method.

Figure 11 shows that the highest degree of membership of a risk with ratings G
and Y is not 1, and the lowest of a risk with rating R is not 0. In this case, without
calculation of the degree of membership, even if we use the simple assumption, we
cannot determine at which point the membership function starts to increase or
decrease. Besides, it still suffers the deficiency stated in the first reason. The above
two reasons suggest the use of our method to output an accurate membership
function.
16 C. Bao et al.

4.2. Fuzzy membership of aggregated risks

For any two fuzzy sets, the most used composition method is the max–min rule
shown in Equation (4) (Zimmermann 2001):
lAB ðzÞ ¼ max minflA ðxÞ; lB ðyÞg; (4)
z¼xy

where ‘*’ stands for ‘+,’ ‘−,’ ‘×,’ and ‘÷,’ respectively.
In this paper, for simplicity, relations between all fuzzy sets (namely, all possible
risks) are not considered. In other words, all risks are assumed to be independent of
each other. Therefore, by repeatedly using the rule in Equation (4), results of opera-
tions of two or more fuzzy sets can be achieved by the following rule:
lA1 þA2 þþAi þþAn ðzÞ ¼ max minflA1 ðx1 Þ; lA2 ðx2 Þ;    ; lAi ðxi Þ;    ; lAn ðxn Þg;
z¼x1 þx2 þxi þþxn
(5)
where lAi ðxi Þ denotes the degree of xi in set Ai (or rating Ai).
Next, we state in detail how rule (5) is applied to obtain the membership func-
tion of a set of n different risks (ratings of these risks are A1, A2, ···, An) with the
help of Monte Carlo simulation.
Step a1. For each rating of the evaluated risks, its corresponding possible risk
values are located in an interval. First, generate a risk value randomly belonging to
the interval, and n risk values are generated in all. Second, calculate the correspond-
ing n memberships of all the n risk values. Both values are recorded in a two-
dimensional array (the two dimensions are risk and risk membership).
Step a2. Total risk of the n risk values is measured by the sum of all risk values,
denoted by Rs, where s presents the sth round. And membership of Rs is the mini-
mum of all memberships of single risks, denoted by μ(Rs).
Step a3. Repeat Steps a1-a2 N times and we now have R1, R2, … , RN, and
μ(R1), μ(R2), … , μ(RN). Check if there are duplicate values of Rp(p = 1, 2, … , N).
If Rp is duplicate (in this case, there are several memberships of Rp), membership of
Rp should be the maximum of all memberships of Rp. After the screening, there are
in total N′ overall risk values and memberships. If the number of simulations is large
enough, we will obtain membership of each possible overall risk in theory.

4.3. Defuzzification of fuzzy membership

Notice that the above results are still expressed by fuzzy numbers, which means
comparisons of any outcomes are difficult. Defuzzification is the technique for
solving this problem. Defuzzification converts the fuzzy number into a crisp value
(Zimmermann 2001). There are many defuzzification methods, such as max
membership principle, centroid method, weighted average method, and so on (Ross
2004). The centroid method is the most prevalent, defined as:
R
 l ðzÞ  zdz
z ¼ RC : (6)
lC ðzÞdz
After the membership function of a set of several evaluated risks is obtained,
defuzzification is employed to translate the fuzzy number into a crisp value, which
presents the magnitude of the risk of the set. By referring to Formula (6), we can
 Journal of Risk Research 17

easily obtain the defuzzification result based on the points on the line of the
membership function.
However, in simulation, there are few duplicate values because of the limited
number of simulations, i.e. we usually cannot get the true membership of a risk
value (the membership of a risk value we obtain is smaller than the true one). For
example, memberships of the simulated risk values may have a distribution as fol-
lows. In Figure 12, for a risk, the membership we obtain is usually smaller than
membership on the boundary of the graph. As a result, we need to obtain the points
on the boundary with an algorithm and the defuzzification result, according to these
points, has a small error.
An intuitive idea is, if we choose m points of risk axis with the same step from
the lowest risk to the highest one and obtain the corresponding memberships of
these points, that is to say, we choose the sample points evenly, the defuzzification
result according to the following formula will be comparatively accurate (Ross
2004).
R P
lðrÞrdr lðrÞr
R¼ R  P (7)
lðrÞdr lðrÞ
The problem for a chosen risk is that its membership may not be output in the
simulation. We take the following approximate method to solve it:
Step b1. Sort the two-dimensional array in ascending order according to risk;
Step b2. Divide N membership samples into m groups: elements of membership
dimension in the array from 1 to N/m are in group 1; elements from N/m + 1 to 2 N/m
are in group 2 and so on;
Step b3. Select the maximal element in each group and totally m elements are
chosen;
Step b4. Select m risk values:rmin ; rmin þ rmaxmrmin ;    ; rmax where rmin and rmax
present the minimum and maximum risks, respectively.

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Figure 12. Distribution of integrated risks with simulation method.

18 C. Bao et al.

By doing so, the number of elements of the two-dimensional array is reduced to

m and the m points can be taken as the boundary points, which can be inserted into
Formula (7) to calculate the crisp value of risk. Notice that the number of simula-
tions N should be large enough so that outline of the membership function such as
in Figure 12 can be seen roughly.
In order to check the accuracy of this method, we apply it to a simple problem:
calculate the centroid of the left in Figure 13. The analytical result of the problem is
certain, which is 7/9. By some preprocessing and after simulation, we obtain some
sample points as shown on the right of Figure 13. With our method, a result from a
simulation is 0.7760, which is near 7/9 according to Formula (7). The variance of
100 simulations is 1.6230e−5 which is quite small. The above analysis shows the
accuracy of this method to obtain centroid of a graph.
So far, crisp risk value of any scenario can be obtained, based on the preceding
analysis. According to these crisp values, we can rank different scenarios so that the
severity of a scenario is reflected by its ranking.

5. An illustrative example
In this section, we apply our method to the case where three different risks, namely,
R1, R2, R3, are to be aggregated.
For simplicity, we set the following case. The three risks are measured by three
3 × 3 risk matrices. The consequences of the three risk matrices are dimensionally
different and defined as follows (Table 2).
As stated before, any infinite intervals are not considered in the aggregation since
they have the highest priority by default. Notice that the measure of risk may be dis-
crete and in such cases, the discrete index should be translated into a continuous
one. For example, casualty (R2) is measured by the expenses incurred for treatment
of injured people although it is usually measured by the number of injured people
which is a discrete index. Besides, we assume all ratings of likelihood have three
intervals: [0, 1/3], (1/3, 2/3], and (2/3,1] which correspond to ‘Low,’ ‘Medium,’ and
‘High,’ respectively. We emphasize that such settings do not mean that numbers
of ratings of consequence and likelihood are necessarily the same and ratings of
inputs should be evenly divided. Our method is applicable for any definitions of

1 1

0.9 0.9

0.8 0.8

0.7 0.7

0.6 0.6

0.5 0.5
y

0.4 0.4

0.3 0.3

0.2 0.2

0.1 0.1

0 0
0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2
x x

Figure 13. Checking accuracy of the method to find the centroid of a trapezoid.
 Journal of Risk Research 19

Table 2. Definition of consequences of three risk matrices.

Risk Description of risk Low Medium High Extreme
R1 Schedule delay: measured [0,10] (10,20] (20,30] >30
in days (unit: days)
R2 Casualty: measured in [0,200K] (200K, 400K] (400K, 600K] >600K
expenses incurred for
treatment of injured
people (unit: $)
R3 Misoperation: measured [0,50K] (50K, 100K] (100K, 150K] >150K
as the corresponding loss
(unit: $)

consequence and likelihood. After normalization, design of the three risk matrices is
as shown in Figure 3: each risk matrix classifies risk into three ratings, namely,
‘Green,’ ‘Yellow,’ and ‘Red.’
The membership functions of the three risk ratings are obtained according to
Formulas (1)–(3), setting n = 5000 (in Formula (3)). Figure 14 presents the profile
of the membership functions.
In Figure 14, the different colored lines denote profiles of risk ratings, ‘Green,’
‘Yellow,’ and ‘Red,’ For a given risk value, we can ascertain the degree to which it
belongs to a certain risk rating. In every rating, there is an interval, where all risk
points have membership of 1, e.g. [1/3, 4/9] in rating ‘yellow,’ which means that the
yellow region in the 3 × 3 risk matrix has some exclusive quantitative points that
will not appear in other different rated regions.
Besides, in the 3 × 3 risk matrix, the membership functions resemble the trape-
zoidal where membership increases or decreases almost linearly. The difference is
that a membership function of rating ‘Yellow’ is not symmetric. In the increasing

0.9

0.8

0.7

0.6
Membership

0.5

0.4

0.3

0.2

0.1

0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Risk

Figure 14. Profile of membership function of the normalized 3 × 3 risk matrix.

20 C. Bao et al.

part, it shows concavity and in the decreasing part convexity. This leads to right
shifting of the centroid compared with a symmetric function. Cases where no quanti-
tative risk has the membership of 1 are common. Under such circumstances, analysis
of membership with our method is necessary for we cannot draw a line from 0 to 1
or 1 to 0 anymore. Both drawbacks suggest using a more correct method to measure
membership, like ours.
Next, memberships of different scenarios, for example, (riskgreen, riskgreen,
riskgreen), (riskgreen, riskgreen, riskyellow), (riskgreen, riskgreen, riskred) and so on, are
achieved according to the composition method shown in Formula (5) and in all there
are 27 (3 × 3 × 3) scenarios. Defuzzification of the 27 memberships is performed in
detail as stated in Section 4.2. In our example, the risk matrices are the same and as
a result, crisp values of some scenarios are the same (for example, crisp values of
scenarios with riskgreen, riskyellow, and riskred are the same). Merge the scenarios with
same risk values and totally we obtain 10 different scenarios. Table 3 reports the
results.
First, note that Table 3 includes some results consistent with common sense. For
example, the scenario of three ‘red’ risks has a higher priority than the one of three
‘yellow’ risks; and for scenarios with two identical risks, the scenario where the
remaining risk is ‘red’ has the highest ranking, ‘yellow’ comes second and ‘green’
last. Moreover, Table 3 suggests something interesting that cannot be judged
intuitively. For example, scenario (riskgreen, riskyellow, riskred) ranks higher than
(riskyellow, riskyellow, riskyellow); generally, we claim that ‘riskred + riskgreen’ > ‘riskyellow
+ riskyellow’ when the third risk rating of each set is the same.
Next, we divide the 10 scenarios into 3 ratings, in line with thresholds 1 and 2,
which means scenarios whose crisp risks smaller than 1 are of rating ‘1,’ those
between 1 and 2 are of rating ‘2’ and those greater than 2 are of rating ‘3.’ Of
course, it is just one possible criterion based on which risk ratings are divided and
some other criteria are applicable (the choice of the criterion is out of the scope of
discussion in this paper). Division of the 10 scenarios is presented in Figure 15.
At last, if we have to judge the severity of risk of a set of three risks measured
by the risk matrices as stated before, we only need to provide judgments on conse-
quence and likelihood of each risk. Then, we obtain risk ratings of each risk accord-
ing to the predesigned risk matrices and we easily achieve the relative severity of
the risk of this scenario.

Table 3. Ranking of aggregated risks of different scenarios.

Scenarios Crisp value of aggregated risk Ranking
riskred, riskred, riskred 2.26 1
riskred, riskred, riskyellow 1.92 2
riskred, riskred, riskgreen 1.66 3
riskred, riskyellow, riskyellow 1.57 4
riskred, riskyellow, riskgreen 1.29 5
riskyellow, riskyellow, riskyellow 1.21 6
riskred, riskgreen, riskgreen 1.04 7
riskyellow, riskyellow, riskgreen 0.95 8
riskyellow, riskgreen, riskgreen 0.68 9
riskgreen, riskgreen, riskgreen 0.42 10
 Journal of Risk Research 21

Risk portfolio
Risk level 3 Risk level 2 Risk level 1
0.42 0.68 0.95 1.04 1.21 1.29 1.57 1.66 1.92 2.26

Aggregated risk

Figure 15. Risk level of different scenarios.

6. Conclusions and discussion

Risk matrices are widely used to assess risks in vague environments. Usually, deci-
sion-makers care more about the overall risk rather than individual risks. In other
words, we need to determine the relative severity of risk of a certain scenario.
Researchers note some obstacles in aggregating risks measured by risk matrices. In
this paper, we start introducing our method for overcoming these obstacles using
quantitative and normalized risk matrices. The fuzzy set theory is adopted to aggre-
gate different risks. As a result, we explore membership, which is an important con-
cept in the fuzzy set theory, in risk matrices in detail. We propose a method to
measure membership of any quantitative risk in a risk rating. Results refute the
assumption that membership functions are linear in a risk matrix. Composition and
defuzzification of risk matrices are different from those of fuzzy sets whose member-
ship functions are assumed to be linear. So, those two techniques are explained in
detail when risk matrices are aggregated. The final results of the illustrative example
show some information that we are convinced and yet uncertain of.
In this paper, a risk is the product of consequence and likelihood, situations
where measures of many forms are used can be dealt with similarly. The method
introduced here does not serve only the purpose of obtaining the overall risk of a
scenario but is also applicable in cases where general risk estimation is needed when
several experts give their individual opinions about a risk.
The method proposed in this paper may have a wide use in practice, such as road
safety analysis (Dell’Acqua, Russo, and Biancardo 2013), if the following two fac-
tors are well dealt with. (1) Accuracy of the design of the risk matrices. Obviously,
the aggregation results of several risks rely on the accurate definition of the individ-
ual risks. Since the risk matrices are essentially qualitative risk management tools,
we think some other tools should be adopted to aid designing more accurate risk
matrices instead of just relying on subjective judgments. For example, intuitively in
a consequence/likelihood axis, the corresponding value is not uniformly distributed.
Exploring the effects of different distributions of consequence/likelihood on the
aggregated risk in future research may be meaningful. (2) The relationships between
different risks. In this paper, we assume that all risks are independent which maybe
is not correct in all cases. It seems that correlations between different risks should
be expressed also in a qualitative way since the problem is set in a vague environ-
ment. However, current related research focuses on studying the correlation between
two risks. Studying the correlation between multiple risks especially in the aggrega-
tion problems may be a novel topic.
22 C. Bao et al.

Disclosure statement
No potential conflict of interest was reported by the authors.

Funding
This work was supported by the National Natural Science Foundation of China [grant num-
ber 71425002], [grant number 71571179], [grant number 71433001], [grant number
71201156]; the Key Research Program of Institute of Policy and Management Chinese Acad-
emy of Sciences; the Youth Innovation Promotion Association of the Chinese Academy of
Sciences [grant number 2013112].

ORCID
Chunbing Bao http://orcid.org/0000-0003-0569-3910
Jianping Li http://orcid.org/0000-0003-4976-4119
Dengsheng Wu http://orcid.org/0000-0002-6162-1287

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