Risk-Based Performance Management: Integrating Strategy and Risk Management

Risk-Based Performance Management: Integrating Strategy and Risk Management PDF
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Achieving financial goals and objectives and maximizing performance are the primary focus for most organizations. Most companies are doing risk management anyway, maybe just not in a formalized ERM program. It starts with defining the goals, objectives, and strategy of the business and, as part of that, identifying enterprise risks and prioritizing them as a team.

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In doing this, executives need to understand the risk appetite of the organization. Insurance is also part of risk management. It tends to focus on known risks.

Risk-Based Performance Management : Integrating Strategy and Risk Management

The problem is the unknown risks, things like supply-chain disruptions or store closures caused by natural disasters. The chief risk officer CRO should be involved in organizational strategy discussions and planning, and help the executive team factor in the risk perspective.

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Pulling together into a single framework the two separate disciplines of strategy management and risk management, this book provides a practical guide for. Pulling together into a single framework the two separate disciplines of strategy management and risk management, this book provides a.

Examples might include the risks of entering emerging markets, extending the supply chain, or introducing new products. One example given was an organization that started off with 30 identified risk factors, then prioritized them down to 10 key ones. The CRO should also be involved in quarterly business reviews QBRs to track progress, changes in strategy, and impact on risks.

Moving from risk strategy to implementation is challenging for many organizations. The key is to focus the efforts and fit the program to the culture and organization. Identify key risks and the related mitigation plans. Risks need to be owned by key executive staff members. Risks can be identified at corporate, department, or location level.

Risk managers should make themselves visible and accessible to line managers, engage regularly to raise awareness, be a resource, and help people work through issues. Ranking risks using a low, medium, high heat map can be a good starting point. Quarterly is the most common frequency of gathering and reporting risk information. Risk-based, data-driven decisions is where the KPI link comes into play.

Integrating Strategy and Risk Management

In most organizations, risk management falls under Compliance or Legal. Line managers need to own and manage the risk.

H. RISK-BASED STRATEGIC PLANNING, BUDGETING AND PERFORMANCE MANAGEMENT

The risk management group helps raise awareness and manages the program. Whoever owns it needs to be connected to the CFO and needs to have a strong sense of how the business runs, including operational expertise. The risk team may need outside subject matter experts as well. Just getting a risk management thought process in place can be helpful.

Integrating Strategy and Risk Management

There needs to be a top-down culture of factoring risk into decision-making, which can bring other benefits. For example, another benefit of risk management is that it keeps insurance rates down if a company is actively mitigating potential risks. Focus on the issues that could have the biggest impact on the organization. Think about the organizational culture and what makes the most sense. Match the ERM program to the appetite of the organization. Prove success. Then expand over time in bite-sized chunks.

This was an interesting panel discussion, one that may have opened the eyes of many in the audience to the need to think more strategically about risk management.

Risk-Based Performance Management: A Framework for Integrating Strategy and Risk Management

As a professional focused mostly on enterprise performance management EPM , I was reminded of the need for risk and performance management to be thought about in parallel and closely aligned. Both processes start with the establishment and communication of corporate goals and objectives, development of strategy, and cascading this down through the organization.

And as plans and programs are established and approved for execution, the related risks should also be identified and tracked, along with performance results. As KPIs are established for monitoring performance, KRIs should also be identified and monitored, whether these are qualitative or quantitative.

Expands reporting to address expectations for greater stakeholder transparency. Accommodates evolving technologies and the proliferation of data and analytics in supporting decision making. Key Features and Benefits Focused framework that is easy to follow with five interrelated components broken up into 20 different principles. The principles are manageable in size, and they describe practices that can be applied in different ways for different organizations regardless of size, type, or sector. Adhering to these principles can provide management and the board with a reasonable expectation that the organization understands and strives to manage the risks associated with its strategy and business objectives.

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Bibliographic Information

ERM provides a framework for risk management , which typically involves identifying particular events or circumstances relevant to the organization's objectives risks and opportunities , assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring process. Sauder School of Business, Canada 'Not only an essential read but a necessary culture for any business attempting to compete and succeed post the financial crisis era. Financial statements. Other experts also recognise the need for new approaches, and are looking at the integration of performance and risk management Committee of Sponsoring Organizations of the Treadway Commission. External Risks Managing Risk is very different from managing Strategy www. Financial Internal Firms Report.

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