Risk Managers can find themselves assuming their ability to tackle risk is as good as it can be. But this is rarely the case.
There are always new skills to be developed and procedures to be put in place. That’s where the idea of working towards risk maturity comes in to play.
What is Risk Maturity?
Risk maturity is the level to which your organization is prepared to handle various risks. The Chartered Institute of Internal Auditing defines five stages of risk maturity:
- Risk Naive (stage 1)
- Risk Aware (stage 2)
- Risk Defined (stage 3)
- Risk Managed (stage 4)
- Risk Enabled (stage 5)
Very few organisations can expect to be at stage 5 of risk maturity from the start. It’s a process, with improvements to be made at every step.
Let’s explore the ways your organization can develop its project risk maturity and in turn be better prepared to navigate risk.
Define Objectives and Processes
Any organization looking to boost its level of risk maturity must first define its objectives and processes in the clearest terms. This would ideally be undertaken by members of the board. However, it’s imperative these objectives are then communicated clearly to all staff members so everyone’s working towards the same goals.
Typical risk objectives include:
- Developing defences against earnings-related risks
- Nurturing a common understanding of risk across the whole organization to help control risks more cost-effectively
- Improve capabilities to respond to low-probability, high impact risks
- Gain a better understanding of risk for competitive advantage
Taking the time to really nail down these objectives will allow you to put consistent processes in place to ensure these goals are achieved.
Management’s Involvement is Key
This may not come as a surprise, but a large proportion of responsibility for an organization reaching stage 5 risk maturity falls at the feet of risk and project managers. They must define risk thresholds, prepare comprehensive risk strategies, communicate these throughout the company, and ensure they report their findings. They must also seek buy-in from the executive suite, making sure the organization’s risk appetite is at the heart of their culture.
Without the hiring, training, and on-the-job development of a talented risk manager, organizations will fail to reach true risk maturity.
What Are the Benefits of Risk Maturity?
When you reach the upper echelons of risk maturity, the benefits are many.
Firstly, seeking risk maturity is economically beneficial. A global study found that organizations in the top 20% of risk maturity enjoyed 3x the level of earnings than those in the bottom 20%. Risk-mature firms can also expect to see their valuation to increase by a quarter and their stock price volatility cut by up to 34%.
This isn’t to mention the fact that risk-mature organizations improve their internal ability to manage risk, increase firm resilience, and garner greater reputations in their sector.
It’s clear that developing a strategy to develop your organization’s risk maturity should be the long-term goal of risk managers. Thankfully, this isn’t as daunting as it seems, especially if you utilize comprehensive risk management tools.
Sarfran Risk Manager, for example, lets you measure the impact of risks more precisely to future-proof as well as better manage projects. It even provides comprehensive retrospectives to contribute towards your organization's overall risk maturity. Try it out for yourself today.