Academic journal article Journal for East European Management Studies

Risk Management Practices from Risk Maturity Models Perspective

Academic journal article Journal for East European Management Studies

Risk Management Practices from Risk Maturity Models Perspective

Article excerpt

The paper aims at providing insight to the understanding, application and utility of Risk Maturity Models that represent a valid tool supporting risk management procedures in organisations. Founded on thorough conceptual analysis of available literature and applicative studies, the paper explains the purposes and methodology of constructing Risk Maturity Models, and then demonstrates possible ways of their use with the application of panel data characterising risk management practices of sampled Polish companies. The demonstration results in pre-mature assessment of risk management practices of Polish companies within the selected criteria.

Dieser Artikel soll einen Einblick in die Verwendung und den Nutzen des Risk Maturity Modells geben, welches eines der bedeutendsten Hilfsinstrumente für Risikomanagementverfahren in Organisationen darstellt. Basierend auf einer gründlichen konzeptionellen Analyse vorhandener Literatur und Studien, erklärt der Artikel den Zweck und die Methodik der Konstruktion des Risk Maturity Modells, um anschließend mögliche Anwendungen aufzuzeigen. Hierfür werden Paneldaten, die die Risikomanagementpraktiken polnischer Unternehmen charakterisieren, verwendet. Die Ausführungen resultieren in einer vorläufigen Bewertung der Risikomanagementpraktiken in polnischen Unternehmen anhand der aus gewählten Kriterien.

Key words: Risk Maturity Models, risk management, enterprise risk management, strategic risk management (JEL: D81, G32)

1. Introduction

Currently, risk management issues grow in importance within both financial and non-financial organisations. Undoubtedly, the prime reason for this trend are the rapid dynamics and constant hardening of the business environment. A well designed and successfully implemented risk management process is helpful in overcoming such obstacles and in providing organisations with a comparative advantage over those that do not manage risk.

Over the past decades, the approaches to risk management evolved to meet the growing requirements of use and effectiveness. According to Culp (2002:8-14), the discussion of risk management in a corporate finance context is still considered odd by some companies. In particular, till the late 90's companies demonstrated visible lack of understanding of risk management by distinguishing 'capital market' vs. 'insurance' perspective of risk management. Since then, the revolution of the concept of risk management is progressing, supported by the convergence of capital market and insurance market products and development of risk management procedure toward a strategic and value-creation oriented approach (Culp 2002:13-14). It seems highly important to promote and discuss ways in which non-financial companies may implement and then control their efforts in managing risk. One of the core problems is how to effectively assess the quality of a company's risk management performance.

The prime purpose of this paper is to provide a closer insight to the understanding, application and utility of Risk Maturity Models (Hillson 1997; Chapman 2006). Grounded on a strategic (holistic) approach to manage risk in organisations, Risk Maturity Models are presented as a valid tool, supporting risk management procedure by providing so called 'hallmarks' of advancement. In the research dimension, the paper aims at demonstrating practical application of exemplary Risk Maturity Models to the assessment of maturity of risk management practices of sampled Polish companies. The example includes a comparison with the maturity of practices recorded in global surveys (AON 2009; AON 2010).

In a theoretical dimension, the paper contributes to the existing knowledge and literature on risk management by filling the gap in the presentation and comparative study of the currently available Risk Maturity Models. In addition, the paper offers some extensions within the discussion over utility of Risk Maturity Models by providing a general approach to the construction of Risk Maturity Models and their linkage with cost-benefit trade-off. …

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