Episode 3: Why 5 VS 3 Lanes Of Risk?
Podcast

Episode 3: Why 5 VS 3 Lanes Of Risk?

May 31, 2023

In this insightful podcast episode, host Ed Vincent is joined by risk assessment experts Beth Watson and Michael Glotz to delve into the topic of risk maturity frameworks and the importance of using five lanes instead of three for assessing risks. Discover why this shift can revolutionize risk evaluations and lead to better decision-making for businesses of all sizes.

Understanding the Need for Five Lanes

During the discussion, it became clear that as organizations mature, a more nuanced approach to risk assessment becomes imperative. The conventional three-lane system (green, yellow, and red) often limits the ability to detect subtle changes and assess risks accurately. By introducing five lanes, businesses can unlock a wealth of benefits, including improved differentiation, enhanced visibility into risk movements, and alignment with regulatory standards.

Unveiling the Power of Movement  

Michael Glotz, an experienced risk professional, shares a crucial insight. In a three-lane model, risk ratings tend to stagnate, making it challenging to showcase any meaningful changes over time. However, with the expansion to five lanes, organizations gain the ability to demonstrate movement within each category. From light green to dark green or lighter red to darker red, these incremental shifts offer a more comprehensive and dynamic understanding of risks and their evolution.

Regulatory Alignment for Effective Communication  

Another compelling reason to adopt the five-lane approach lies in regulatory compliance. Regulators, such as the OCC and FDIC, use a five-point rating system to assess banks. By aligning their risk assessments with this established framework, businesses can ensure consistency and effective communication with regulatory bodies. This alignment fosters mutual understanding, facilitates compliance, and strengthens the relationship between banks and regulators.

In summary, transitioning from three lanes to five in risk assessments brings about a paradigm shift. It allows for greater differentiation, improved visibility, and alignment with regulatory standards, leading to more informed decision-making for businesses across industries.

Listen or watch the full recording below.

RMA RIsk Maturity Framework

Powered by SRA Watchtower

Take the self-assessment today to
measure your institutions risk maturity.
SCHEDULE a demo

EXPERIENCE. WISDOM. KNOWHOW.

Book an

SRA CONSULTING

discovery session

SCHEDULE NOW
Three ways to tap into the people, technology and insights of SRA.
We're focused exclusively on the serving the financial & Insurance industries.

DISCOVERY 
SESSION

Schedule a 30 minute discovery call with an SRA risk expert to understand your challenges or opportunities ahead to see how Watchtower can help you achieve your goals.
SCHEDULE NOW

WATCHTOWER
DEMO

Look inside Watchtower, the holistic risk intelligence platform to learn how it helps executives navigate risk and drive growth.
BOOK TODAY

Risk Intel
Podcast

Listen and learn from SRA risk enthusiasts, Watchtower customers, and experts across the financial industry through our weekly risk focused podcast.
REGISTER

MOre FROM

SRA Newsroom

RMA RIsk Maturity Framework

Powered by SRA Watchtower

Take the self-assessment today to
measure your institutions risk maturity.
SCHEDULE a demo