Adopting a Risk Maturity Model for Businesses

Risk Maturity Model: What Is It and How To Use It

Risk maturity models help companies evaluate internal risk management strategies. They outline a roadmap that demonstrates how companies can better protect against a variety of different threats. You can use a risk maturity model to identify and navigate any issues or gaps in your risk management strategy.

Your risk maturity model should be structured in a way that highlights any challenges to your company’s success. While each maturity model is slightly different, many share common elements — including evaluations of your risk governance, assessment, and monitoring.

The Importance of Risk Management

Risk management is an important — and often forgotten — pillar for ongoing operations. Many companies prioritize sales and customer success when evaluating their performance. Fewer companies also consider the ways that risk management might also affect success.

The risk management process helps you avoid the painful consequences of neglecting threats. Without risk management, your company could be subject to revenue losses, compliance issues, or problems with continued operations. You might also miss further business opportunities while dealing with expanding risks.

Key Components of a Risk Maturity Model

An effective maturity model is made of several important features. These components help company leaders identify, understand, categorize, and address risks before they evolve.

Here are some essential components of a risk maturity model:

• Risk culture: Values and beliefs that govern how a company addresses internal and external risks.
• Risk governance: Policies that identify who at an organization will respond to particular threats. These regulations also outline responsibilities for each employee in the event of a realized risk.
• Risk identification: The diagnosis process of risks within an organization. Risks should be identified using a system that audits employee activities, devices, data processes, market trends, and other factors.
• Risk treatment: The process of building risk mitigation strategies that minimize threats before they evolve.
• Risk monitoring: The ongoing tracking process where employees gauge how risks might change over time. Employees will also report any risk-related changes to stakeholders.

These features of a well-developed maturity model help companies neutralize risks soon after they emerge. They also allow employees to actively participate in a company’s risk identification and elimination process.

The Five Levels of Risk Maturity

Depending on the sophistication of your risk management process, your organization might fall under one of five levels of risk maturity:

• Awareness: Company employees are aware of the importance of risk management, yet they haven’t taken steps to implement it.
• Basic Understanding: When company staff members develop a basic understanding of potential risks and how they might affect the organization. Training gaps still exist as employees participate in educational risk mitigation workshops.
• Application: Employees learn how to apply risk management strategies across the organization. Executives also understand how to lead risk management protocols and involve direct reports. Staff actively use the information on risks to inform decisions.
• Embedding: All staff now communicate openly about risks and how to mitigate them. Companies now can handle risks that affect external partnerships.
• Excellence: Companies now use these strategies to identify both opportunities and risks. Employees integrate risk theory into everyday tasks. Staff members plan for long-term risks when building out new procedures.

These stages outline a company’s progression from risk awareness through risk excellence. Each stage requires more buy-in from company employees and executives alike.

Benefits of Using a Risk Maturity Model 

Companies enjoy several benefits soon after adopting a maturity model. One of those benefits — visibility — gives a business more insight into how risks might limit success. All organizations using a risk maturity model develop a better awareness of risks that might have been previously hidden.

Maturity models also help encourage communication between team members. It helps all employees understand the threats their employer might face. The model also identifies the steps employees should take to neutralize those threats. These steps typically require teamwork and collaborative decision-making to fully prevent a risk from evolving.

A fully integrated maturity model can quickly create a competitive advantage. Companies that use enhanced risk mitigation can quickly distance themselves from competitors. Organizations that further disclose their risks can also improve trust with customers and stakeholders.

Assessing Your Organization's Risk Maturity

Evaluating risk maturity can be a time-consuming process. However, it’s an important step in diagnosing risks that otherwise go undetected.

Here are a few steps a company can take to evaluate risk maturity:

• Identify risk gaps: Take note of areas in your organization that are not sufficiently prepared to defend against risks.
• Review risk management policies: Examine regulations that define how your company should respond in the event of a risk. Add any policies that make your risk management process more clear.
• Audit your risk culture: Evaluate how well your company handles risk management alongside other priorities. Collect employees’ thoughts on current risk management strategies through polls, surveys, or meetings.
• Assess areas for improvement: Reconsider your risk culture, gaps, and policies together. Develop an action plan that identifies how your organization will identify and manage business risks.

Evaluating your level of risk maturity isn’t meant to be a one-time process. As your priorities change, your level of risk maturity might improve or decline over time. Continually evaluate your approach to risk in ways that identify any new or emerging challenges.

Implementing A Risk Maturity Model

Creating and integrating a successful maturity model is a deliberate process. The implementation process requires several steps, including training, communication, and model customization.

It’s important to delegate priorities correctly when implementing a maturity model. Consider nominating a team of employees from different departments who have the bandwidth to handle risk-related tasks. With oversight from company leaders, this team will be responsible for implementing and reporting on the company’s risk maturity model.

Your maturity model should be as flexible as your organization. It should change as your company’s products, services, or mission changes. Many companies use risk management software that allows risk strategies to evolve over time.

Measuring and Monitoring Risk Maturity Progress

Technology makes it easier to measure and monitor the progress of your maturity model. Proper risk intelligence programs help companies identify key risk indicators (KRIs) and better process feedback from employees.

Everyone at a company has a role to play in fulfilling a maturity model. This makes accountability an executive’s friend when evaluating progress toward better risk management. Create continuous improvement programs that measure ongoing progress across departments. Identify which areas of your company are actively preventing risks — and which could use more encouragement.