The shockwaves from the bank failures of early 2023 still resonate through the corridors of corporations worldwide, igniting a critical discourse on the essence of enterprise risk management (ERM). Amidst this climate of uncertainty, the “2023 State of Risk Oversight” report casts a stark light on the pervasive immaturity of ERM practices among US organizations.
Mature delivery of Enterprise Risk Management significantly impacts an organization’s ability to achieve its objectives, achieve compliance, and build risk intelligence. An ERM maturity assessment allows you to gain valuable insights into your business’s current state and long-term ability to weather storms, seize opportunities, and achieve sustainable growth.
Read on to better understand how assessing your organization’s ERM maturity level can help you gradually improve your risk management discipline, ensuring you’re well-prepared for the challenges ahead.
How to conduct your ERM maturity assessment
ERM is the backbone of strategic agility and sustainability, no longer merely a checkbox on the long list of corporate due diligence tasks. While no one has it all figured out, having a mature framework for your risk management practices starts where you are. From there, teams can build an ERM maturity roadmap to more reliably identify, manage, and even capitalize on risks, charting a course toward not just survival but prosperity for your business.
So, how can you assess your organization’s ERM maturity level and pinpoint areas for enhancement? Here are the essential steps to follow:
1. Define your ERM vision, objectives, and framework
Your journey begins with a compass — choosing a robust ERM framework finely tuned to your organization’s strategic aspirations and industry standards. Get clear as an organization as to what your ERM program should do in its ideal state. This foundation sets the stage for what’s next, aligning policies, processes, and roles with the organization’s aspirations and the regulatory standards that guide them. Look to established models, like ISO 31000 and COSO ERM, and decide which framework best supports your organization’s goals as you scale and grow.
2. Assess practical ERM program implementation
With your framework decided, assess how effectively your current ERM plan translates into action. Engage every tier of your organization — from the boardroom to the break room — to get a sense of current process effectiveness through surveys, interviews, audits, or self-assessments. But remember, a plan that stays on paper is a ship that never sails.
3. Evaluate your ERM practices
Quantify your risk management strategies by defining and monitoring Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs) in line with your risk appetite and tolerance. Blend quantitative and qualitative data to gauge how your risk management practices contribute to value creation, stakeholder satisfaction, and competitive advantage. These metrics offer a tangible measure of your progress and alignment with predefined targets.
4. Identify gaps in risk management processes
Here’s where you don the detective’s hat. Analyzing your evaluations and measurements — remember those surveys? — pinpoint gaps between your current and desired level of risk management maturity. Prioritize these gaps based on impact, urgency, and feasibility using a risk bowtie or other ranking method. Delve into the underlying causes, document your findings, and create a proposed action plan for stakeholders and decision-makers based on your insights. Validate your recommendations with risk data where possible.
5. Craft your ERM improvement strategy
ERM systems act as navigation tools to ensure organizations can be prepared when faced with uncertainties. Making the most of your solution requires an improvement strategy that identifies hidden risks and enhances your ability to weather storms. This not only keeps you in compliance but also builds trust with stakeholders and showcases your commitment to proactive risk management. Allocating resources for this allows your organization to remain resilient, thus fostering a culture of continuous improvement.
Read more: 5 Steps to Reinvigorate Your ERM Program Components
Interpreting assessment results
Your ERM maturity assessment will yield scores or rankings that indicate your current maturity level. Evaluate these scores and rankings to understand your organization’s ERM maturity level. Are you at the lower Track level, with a need for significant improvement? Or are you closer to the highest Innovate level with a strong risk management culture? Understanding your scores is the first step in making informed decisions about where to go next.
Review your ERM maturity assessment results to pinpoint your organization’s strengths and weaknesses. This analysis can help you identify areas where you excel and can serve as examples of best practices. Simultaneously, it highlights areas where improvement is needed and where your focus should be directed.
After conducting your organization’s ERM maturity assessment, the next step is translating those findings into actionable insights and informed decision-making.
Prioritize ERM improvement areas
Not all gaps in ERM maturity are created equal. Prioritize the areas for improvement based on their impact on your organization’s goals, urgency, and feasibility. Some gaps may have more significant consequences if left unaddressed, while others may be easier to close. By setting priorities, you can direct your efforts and resources efficiently.
Develop an ERM process improvement plan
Develop a strategic improvement plan outlining the steps, actions, responsibilities, timelines, and resources required to bridge the identified gaps. Ensure that your strategy aligns with your organizational goals and secures the necessary support from leadership.
Monitor progress and adapt
Following your organization’s ERM maturity assessment, it’s important to implement monitoring mechanisms to track your progress in closing the gaps and elevating your ERM maturity level. Regularly review your improvement plan and be ready to adapt it as circumstances change.
See how Resolver’s ERM Maturity Model enhances risk visibility
Assessing your organization’s risk maturity level is not just a routine checkup; it’s the key to ensuring your company’s health and longevity. Your organization can unlock sustained success by regularly assessing and elevating ERM maturity levels. This involves tracking and understanding your organization’s risks, orchestrating a plan to prioritize risk management, coaching your team to own possible exposures and apply risk practices to day-to-day business operations, integrating risk management within the organization, and using innovative systems integrated with risk for automated information sharing.
Resolver’s ERM Maturity Model can help organizations build their multi-year ERM plan to proactively manage risks, make informed decisions, and develop robust risk management strategies. Strengthening resilience against uncertainties empowers organizations to thrive and prosper in an increasingly complex and unpredictable world. In a nutshell, embracing the journey of continuous ERM improvement is not just a choice; it’s the path to enduring success.
Ready to assess your organization’s ERM maturity? Download our simplified ERM Maturity Model e-book today and start building a more resilient future for your organization.