Risk Management Framework & Maturity Criteria

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Risk Management Framework & Maturity Criteria

June 23, 2025

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At its core, risk management is about protecting and enabling your organisation's objectives. The framework that makes this possible is not just a collection of procedures, it is a living system that helps you navigate uncertainty with confidence. This system operates through four essential actions, plus one critical element that brings everything together: risk identification, risk assessment, risk mitigation, risk monitoring and risk appetite.

In this article and in Ariane Chapelle’s first video of our BDO Risk Blueprint, you will read about these elements as well as other essentials and tips to implement strong and healthy risk management.

Discover our risk blueprint video's

The five key elements of a risk management framework

The first crucial element to build a strong, solid framework is risk identification. Think of this step as your organisation's early warning system. During this phase, you think about what could go wrong and, more importantly, what might stand between your organisation and its ambitions. Not just by listing potential problems, but by gaining a deep understanding of the challenges that could affect your success.

Once you have identified potential risks, the next step is performing a risk assessment. Here, we move from awareness to evaluation by seeing how much each risk matters. This evaluation considers both the likelihood of the risk occurring and the potential impact it could have on your organisation. By knowing the scope of your risks, you are building the foundation for informed decision-making.

With this knowledge in hand, you can move to risk mitigation and controls. These are the practical measures you put in place to reduce the risks you face. But implementing controls is not the end of the journey. Finally, it is essential to ensure everything works as intended through careful risk monitoring.

Binding all these actions together expresses the motivation for risk management: risk appetite. Risk appetite is your organisation's compass, it helps you to calibrate and target your risk management actions. It defines not only how much risk you want to face, but also the level of residual risk you are willing to accept.

Risk Management Framework - Five Key Elements

What does ‘good’ risk management look like?

When we talk about maturity in risk management, there are three essential qualities that distinguish effective frameworks: proportionality, consistency, and iteration.
Each of these elements plays a crucial role in creating a robust risk management system.

Good risk management is proportionate. You want to spend more time on your big risks with major consequences and not overfocus on what matters less. The importance of this proportionality becomes clear when we look at real-world data.

Statistics from ORX tell a compelling story about operational risks. The smallest incidents, those between €20,000 and €50,000, make up 61% of all reported cases but account for only 5.7% of total losses. In stark contrast, the largest incidents - those over €10 million - represent just 0.3% of cases but comprise nearly two-thirds of total losses.

This example highlights a crucial lesson: while small incidents may demand frequent attention, it is the rare, large-scale events that typically consume most of your operational risk budget.

A second element to determine the maturity of your risk management framework is consistency. This factor acts as the thread that weaves your risk management framework together. It ensures that your organisation's approach to risk management remains coherent across all levels, from high-level capitalisation decisions to day-to-day risk monitoring.

The third element, iteration, recognises that risk management is a dynamic process. Think of it as a continuous cycle where each element of your framework leads to the next one. By repeating this cycle, you gain new insights that help refine your entire approach. Continuously integrating new information into your risk management actions, allows your framework to stay relevant and effective as your organisation, and its risk environment, evolve.

Risk Management Framework - 3 Maturity Criteria

Building a strong risk culture

The most effective organisations understand risk management is not just about frameworks and procedures. Effective managers create a culture where managing risk becomes second nature. One way of standing out is how you handle communication about your risks. Do not shy away from discussing operational risk incidents but use these experiences as valuable learning opportunities.

This openness extends to how organisations approach risk reporting. By maintaining comprehensive documentation of both incidents and near misses, you can create a rich source of insights for continuous improvement and expand risk awareness. But what truly sets mature organisations apart is their proactive approach to development.
Do not wait for regulatory findings or audit points to seek improvement. Instead, actively pursue benchmarking and advice to strengthen your risk management practise.

The foundation of effective governance

Strong governance in risk management rests on clear responsibilities and effective training, but the essence lies in bringing these elements to life through leadership.
When management leads by example, maintaining strict discipline in governance becomes part of the organisation's DNA. This leadership creates an environment where everyone understands their role in managing risk, whether they are part of the first, second, or third line of defense.

Training and supervision also play a crucial role in this system, following the requirements set by the Basel Committee. Each line of defense requires specific competencies, and effective organisations always make sure their people develop these skills through structured programs and ongoing support.

Measuring and improving maturity

Realising where your organisation stands in its risk management journey is crucial for improvement. This understanding comes through careful assessment across multiple dimensions of risk management practice. Through tools like ORM 360, you can gather insights from different perspectives across your three lines of defense, measuring alignment with Basel Committee guidelines and tracking progress over time.

This comprehensive approach to assessment helps organisations not just understand their current state but also identify clear paths for improvement. It's about creating a foundation for continuous development, ensuring that risk management capabilities grow alongside the organisation itself.

Growing into mature risk management will always be a work in progress.

However, if you take into account these essential elements and how they work together,
you can build a risk management framework that not only protects you from risks but also support your growth and success.

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Risk management framework & maturity criteria