Part of a robust and effective enterprise risk management (ERM) strategy is to perform a periodic assessment of risk management activities and the continuous improvement of these processes. This assessment process can be performed using a risk maturity model, which is an essential tool for the company’s planning.
The Risk Maturity Model (RMM) is an assessment tool focused on the organization’s risk culture and the development of the organization’s risk management program. It evaluates the extent to which risk management is embedded within the organization, where a high maturity level translates into effective risk management.
Using a maturity model is a proactive approach to ERM. It enables a look at the company’s current situation and critical points to achieve future maturity levels.
What Is the Purpose of a Risk Maturity Model Framework?
A risk maturity model framework allows a company to benchmark its risk management activities against proven RMM identifiers. This helps the company to reduce its risks and protect stakeholders.
The main objective of assessing risk management maturity is to consider the organization’s perception of the risks it faces and the gaps that can be addressed, to strengthen the overall risk management program.
Periodic risk management maturity assessments enable the creation of roadmaps to better risk management performance. These tools track the progress of risk management policies that can help influence the decision-making process, identifying deficient or successful policies over time.
In conjunction with other risk landscape assessment methodologies, risk managers can leverage RMM assessments to address the organization’s vulnerabilities and improve risk management capabilities.
What Are the Components of a Risk Maturity Model Framework?
A risk maturity model is based on a series of attributes that describe the organization’s risk management capabilities. These key attributes are determined in several areas around the organization and averaged to generate an overall level of maturity.
The Organisation for Economic Co-operation and Development (OECD) established five maturity levels (each with their own respective attributes) focused on tax administration, which can be adjusted to different types of organizations. These metrics are:
- Emerging. At this level, also known as “ad hoc,” it is understood that there is little or no risk management in the organization.
- Progressing. This level is characterized by having a higher level of risk management in an isolated and particular way. It is also known as “preliminary” or “initial.”
- Established. Understood as “defined” or “repeatable,” this maturity level indicates the presence of a risk assessment program, an overview of enterprise risks, and action plans in place to address high-priority risks.
- Leading. At this level, risk management tasks are comprehensive, and risk monitoring, measurement, and alerting tools are in place throughout the organization. This level is also known as “integrated” or “managed.”
- Aspirational. This is the highest level of risk management maturity, also called “leadership.” You will find an active risk management approach linked to performance management and success of the organization’s activities.
How Can I Use a Risk Maturity Model?
The ERM Risk Maturity Model is a self-assessment tool, highly dependent on an objective assessment process. Consequently, it should be conducted with sufficient time to allow discussions on the assessment, consider various members in charge of risk management, and include participants with an external perspective to the risk management chain.
The assessment should consider several components to serve as a guide to adequately define the organization’s maturity level. These components are:
- ERM process management. This considers the extent to which ERM has been incorporated into the organization’s decisions and the level of adherence to assessment, monitoring, and mitigation best practices.
- Risk appetite management. This component measures the overall risk awareness of the company based on risk appetite metrics and risk tolerances.
- Root cause focus. This element evaluates the overall risk management approach of the organization, especially whether the company tilts toward mitigating consequences or remediating root causes.
- ERM culture. This identifies the adoption of enterprise risk management within the organizational culture at the executive level or board of directors as a “tone at the top.”
- Risk identification. This measures the effectiveness of risk assessments, including risk information collection methods, risk assessment process, and other related elements.
- Performance management. This component measures the planning, communication, and measurement of objectives based on risk management activities within the organization.
- Business resiliency and sustainability. This reviews the inclusion of risk management strategies within business continuity, operations planning, and sustainability activities.
Manage & Mitigate Risks with ZenGRC
Assessing operational risks, implementing internal controls, and producing documentation at every step of the way can be time-consuming and inconvenient if carried out manually.
ZenGRC is a governance, risk management, and compliance (GRC) software solution that can help you build, manage, and audit your risk management process. In addition, its workflow tracking allows the assignment of tasks to members responsible for risk assessment, risk analysis, and risk mitigation within your organization.
ZenGRC also helps risk professionals assess and keep track of your organization’s risk management maturity level. Dashboards and reports are readily available and easy to read. The Reciprocity team provides support from subject matter experts as well as other technical risk assessment tools.
Contact us for a demo to learn how ZenGRC can streamline your GRC process.