Risk Maturity Model 101: Enhancing ERM

Resolver
December 19, 2023 · READ

In a business era punctuated by the unexpected, from pandemics to geopolitical strife, the resilience gap between companies has been starkly outlined. The difference-maker? Maturity in risk management. BCG’s Global ESG, Compliance, and Risk Report 2023 unveils a compelling narrative: firms with sophisticated frameworks and risk maturity models didn’t just survive; they thrived amidst turmoil. Their secret? A harmonious fusion of strategic depth and operational agility enables them to turn potential threats into business opportunities. This report, drawing from a global survey of senior executives, crystallizes the benchmarks for risk management excellence and provides a roadmap for businesses ready to evolve from reactive to strategic, from fledgling to mature, solidifying risk management as a pillar of sustainable success.

Enterprise Risk Management (ERM) Maturity measures how effectively an organization identifies, assesses, manages, and monitors risk. It signifies the organization’s level of proficiency in navigating the complex landscape of risks and uncertainties through five levels outlined in a risk maturity model. Whether you’re new to ERM or a seasoned practitioner, evaluating your risk maturity can help you make more informed decisions, prioritize efforts, and achieve long-term success.

The below sections will provide insights into what a risk maturity model outlines and why understanding your maturity level is pivotal for your organization’s growth. We’ll walk you through the five distinct levels of ERM maturity, giving you the tools to assess where you stand and where you could go.

If you are unsure about your organization’s current risk management practices or are looking to take your ERM discipline to the next level, we’re here to help. Our solution starts right where you are, allowing you to define your aspirations to build a mature, resilient risk management framework. Get answers to the following, commonly asked, questions surrounding ERM maturity:

  1. What are the five levels of risk maturity?
  2. How is ERM maturity measured?
  3. How do we determine our ERM maturity level?
  4. How do we assess our risk maturity?
  5. What are some roadblocks to building ERM maturity and what can you do to overcome them?
  6. What are the most common problems with ERM and how can we solve them?

What are the 5 levels of our risk maturity model?

Erm maturity model

Understanding risk maturity levels is pivotal in refining your organization’s risk management strategies. Resolver’s ERM Maturity Model categorizes organizations into five distinct levels:

Track (Level 1)

At this stage, risk management is informal and reactive. Organizations lack structured processes, often dealing with risks as isolated incidents rather than integrated components of the overall strategy. To advance, organizations need to establish foundational risk management processes and cultivate a risk-aware culture that responds to emerging risks proactively.

Orchestrate (Level 2)

Basic risk management processes exist, yet they lack coordination. While efforts are made, they often occur in silos, lacking a unified approach to identify, assess, and manage risks effectively. Progress means unifying these processes, ensuring that they communicate across departments and functional areas, enabling a more cohesive approach to risk management.

Coach (Level 3)

Progressing to this level signifies standardized processes. However, there’s room for improvement in integration. Risks are managed consistently, yet there’s a need to bridge gaps between departments and functions. Working to improve coordination and ensure the sharing of risk information are key steps toward the next stage.

Integrate (Level 4)

Organizations at this stage have well-integrated risk management practices. Risk processes are streamlined across departments, ensuring a cohesive approach. Continuous improvements are made, aligning risk management closely with strategic objectives. Advancement involves continuous improvement, fine-tuning risk processes to align seamlessly with strategic objectives. Embed risk awareness throughout the organization to transition to the Leadership level.

Innovate (Level 5)

The pinnacle of a risk maturity model, this level represents a proactive, forward-thinking approach to risk management. Risk practices are ingrained in the organizational culture, influencing decision-making at every level. Leaders anticipate risks, leveraging them as opportunities for growth. To maintain this level, organizations must stay ahead by anticipating emerging risks, seizing opportunities, and nurturing a culture of innovation and risk-informed decision-making.

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How is ERM maturity measured?

ERM maturity is measured through a structured assessment of your organization’s risk management practices. A risk maturity model offers a comprehensive framework to evaluate your current maturity level and identify areas for improvement. Assessing your risk maturity level helps you understand your strengths and weaknesses, prioritize areas for enhancement, and develop a strategic plan for improvement. This process empowers your organization to build a realistic plan for risk management, maturing it over time and enhancing your resilience in the face of diverse risks.

Image of graphs from cm status report by compliance framework

Resolver’s ERM Maturity Model provides a simplified approach to assessing risk maturity. Unlike traditional risk maturity models that may rely heavily on quantitative measurements and detailed metrics, Resolver’s model is designed to offer a more straightforward assessment process. It focuses on guiding organizations through a qualitative understanding of their current risk management practices and identifying key areas for improvement. This approach allows organizations to gain insights into their strengths and weaknesses in risk management without the complexity of extensive metrics.

Learn more: What Is Enterprise Risk Management? Why It Matters And How To Use It

How do we determine our ERM maturity level?

The first step is establishing a baseline of your current risk management practices. This involves a comprehensive assessment of existing policies, procedures, and past risk-handling data to identify strengths and weaknesses. You then need to establish processes in order to continue with the development of a detailed risk register that lists all identified risks, their potential impacts, and corresponding mitigation strategies.

Using Resolver’s ERM Maturity Model, the organization sets clear, measurable goals aligned with its business strategy, helping to chart progress in ERM development. The incorporation of appropriate technology solutions, such as risk management software and analytics tools, further supports the maturity assessment by enhancing the efficiency and effectiveness of risk management processes. Additionally, a key factor in determining maturity level is the extent to which a risk-aware culture is embedded within the organization, often achieved through comprehensive training programs. Regular updates and reassessments ensure that the ERM strategy remains relevant and responsive to evolving risks and business needs.

How do we assess our risk maturity?

Assessing your organization’s risk maturity is vital and involves selecting a suitable ERM framework, such as ISO 31000 or COSO ERM, tailored to the organization’s strategic goals, and rigorously implementing it across all levels. Critical to this assessment are Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs), which provide quantitative and qualitative measures of risk management effectiveness. Identifying and addressing gaps in risk management processes is essential for crafting a robust improvement strategy.

Resolver’s ERM Maturity Model offers a simplified approach, enabling organizations to develop a proactive risk management plan, enhance decision-making, and build resilience in a complex, unpredictable environment. This model facilitates a practical assessment and continuous improvement of ERM practices, aligning them with long-term organizational success.

Graphic representing kri reporting

What are some roadblocks and solutions to building ERM maturity?

Building ERM maturity faces challenges such as resistance to change, where introducing technology for efficiency and comprehensive training on new tools can help ease the transition. Limited resources are another hurdle, addressed by investing in scalable, cloud-based ERM platforms for cost-effective solutions.

Gaining leadership support is crucial; this involves highlighting the strategic benefits of technology-enabled ERM, focusing on real-time visibility and data-driven decision-making. Additionally, updating inadequate technology infrastructure to align with ERM goals and focusing on user-friendly, collaborative tools are essential. Overcoming ineffective data management and siloed information requires implementing advanced data analytics and centralized platforms for better collaboration. 

Read more: Assess Your Enterprise Risk Management Maturity in 5 Steps

Tackling common risk maturity challenges

Problem: Are you doing ERM correctly, or at all?

Solution: If you find yourself unsure about your organization’s approach to ERM or if you’re doing it at all, you’re not alone. Many organizations face this challenge. Begin with a self-assessment to evaluate your current ERM procedures. This foundational analysis should pinpoint strengths, uncover gaps, and lead to a path for progressive improvement. It’s about turning uncertainty into clarity, setting the groundwork for informed decision-making and strategic action.

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Problem: Overwhelmed by trying to mature your ERM programs?

Solution: Start where you are to define where you want to go.

Feeling overwhelmed is common when scaling ERM practices across an organization. The complexity of advancing ERM processes and integrating them into every department can indeed be overwhelming. Instead of attempting a complete overhaul, focus on incremental improvements. Identify immediate areas for development and craft a phased plan that addresses these areas, ensuring each step contributes to the overarching goal of ERM enhancement. By breaking down the process into manageable stages, you can foster steady progress without overburdening your team.

Results: A structured plan for ERM maturity

Crafting a plan for ERM maturity yields a blueprint that aligns with your organization’s aspirations and strategy. This well-articulated roadmap not only navigates common ERM pitfalls but also steers your organization toward a dynamic and robust risk management practice.

By utilizing Resolver’s ERM Maturity Model, you’ll have a practical, step-by-step plan to enhance your risk maturity over time. This approach supports informed decision-making and ensures that your risk management initiatives are in lockstep with your strategic objectives. Start your journey towards resilience and operational excellence by evaluating your current risk management state and plotting a course for sustained improvement.

Embark on your path to ERM maturity — download Resolver’s ERM Maturity Model now and set the stage for a resilient future.

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