Risk management is a moving target in a high-speed world. Even organizations accustomed to volatility and uncertainty have recently been taken by surprise at the speed of change and the increasing velocity of risk they face.
This challenge becomes even greater in sectors defined by innovation, complex technical development, multiple (often international) stakeholders, and strict security requirements. In this setting, handling risk is more important than ever.
Risk management in defense
When it comes to defense risk management, it’s about managing it throughout the entire delivery mechanism, from customer and stakeholders right down to the smallest suppliers. Successful delivery is dependent on the weakest link in the chain.
Prime contractors generally have a high level of risk awareness and maturity. With good reason, as they have a lot at stake: it’s not just the bottom line they must concentrate on, but also reputation risk and the ability to win future contracts. A recent QinetiQ analysis of major UK defense projects showed that projects with mature risk management practices (Level 3+ on a scale of 1-4, as measured against the QinetiQ Risk Maturity Model) indicated an average schedule over-run of 4%, where projects with a low level of risk management maturity, this increases to 56%.
As scrutiny over defense procurement spend rises, so does the demand for visible demonstration of prudent management and fiscal control. In this environment, risk-based decision-making constantly demonstrates its value. It is also the preferred way to address complex defense decisions, especially significant procurement and acquisition decisions.
As a result, prime contractors are increasingly expecting their major suppliers to demonstrate a high level of risk maturity to safeguard their major defense programs through early identification of schedule and cost impacts together with their treatment.
Along with improved cost and schedule outcomes, the advantage of providing openness and decision traceability are both essential for audit and review purposes, and support transparency.
What good risk management looks like
So how can your organization ensure it is supporting good risk practices? Risk management works best when leadership teams set the right culture within the organization – including risk appetite and attitude. With risk, it’s ultimately people who make it all work, so it needs to be part of defense organizations' DNA. Senior buy-in is critical to success and is the starting point for embedding it throughout the enterprise, from program governance and supply chain to export controls and IT.
All systems need to be joined up, from stakeholder expectations and demands all the way down through the supply chain. It’s also important that risk spans the whole organization. Modern day conflict requires a joined-up approach – a necessity for communication and management of risk.
Integrating risk across the organization fosters positive behaviors and embeds a success-focused mindset. When risk management is fully adopted, it leads to outcomes such as:
- Clear understanding of risk exposure that informs better decision-taking
- Openness in communicating challenges, paired with solution-oriented thinking
- Proactive measures that replace last-minute crisis management
The future of risk in defense
Risk management will become even more important to defense as it adapts to more volatility and uncertainty. In addition to the uncertain business environment caused by globalization, organizations must also deal with rapidly shifting political landscapes, emerging technologies, demographic and workforce changes. Looking ahead, risk management will become more outward looking at the project level and take in a wider understanding of the context in which equipment is being developed. It will also need to respond to worldwide developments in real time by monitoring risks continuously and responding in an agile way.
This change will not only be good for the way risk management can support the industry—it will also deliver far more quickly to the end-user. The need for faster decision-making requires increased forward planning, with a much more informed view of the risks that could materialize out of any necessary snap decision. Placing risk management at the center of defense thinking will avoid unnecessary financial costs, lives lost, and national security compromised.
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Updated: May 23, 2025
Author: Vicky Maggiani
This article was based on a conversation between Defense Online and Val Jonas, former CEO of Predict!