Integrating Risk Management with Balanced Scorecard

Enterprise Risk Management (ERM) is slowly becoming a topic of interest to many management boards. After all, why stop at compliance with SOx or the 8th Directive on Company Law (Europes upcoming version of SOx, "EuroSox"), when ERM provides the carrot that the SOx stick according to many, seems to be missing?

ERM has a clear value add to provide organizations: It aims to improve your chances of actually succeeding in executing your strategy and thus serves the achievement of goals. What's more: Being able to show off that the organization has a top-notch ERM process in place (that actually delivers more than it costs) is likely to get investors more interested in the company and also has a positive effect on your negotiating power with insurance providers: I've seen large companies in high-risk businesses pay 30% less on insurance than any of their industry peers just because of their excellent ERM progam.

With ERM serving strategy and Balanced Scorecard managing strategy, there seems to be a clear link between the two. Henry Killackey wrote an interesting piece on it recently. He argues that ERM can be made a part of BSC. I agree with Henry, although there seem to be some parts missing if you wish to do it right, like for example the documenting and managing of processes, documentation, collaboration etc. I wrote a white paper on risk management not too long ago, which includes the BSC approach and goes a bit further...

The Strategy Map

It's a bit late but...tomorrow QPR Software organizes a free webinar about "the strategy map", with no one less thanDr. William Hendricks as speaker. With well over 300 (!!) balanced scorecard implementations on his rap sheet, Dr. Hendricks probably qualifies as one of the most experienced BSC consultants worldwide.

QPR is running a series on Balanced Scorecard best practices - not the usual marketing blah blah you usually get from many vendors or "self proclaimed performance management experts" (read: marketing execs). The previous session with Dr. Hendricks on building scorecards is available from its website and I expect tomorrows' webinar to be available from the same location soon. Expect to get some free tools and insight you can use to keep your own BSC top notch.

Do you really know what's going on?

Research in February 2008 by BP Trends revealed that most organizations only occasionally document up-to-date work processes.

Most organizations therefore just "do" things but do not have a real clue about how, or how well, they do them. This was one of the topics Simon Holloway, Bloor Research's process practice leader touched upon in a recent webinar on the latest trends in business process management technology.

How can you be able to improve a process if you do not have a very clear view of it? Process mapping is an essential activity for improving the way you do things in your organization, department, team. Not only will you often hear "I did not know we did that this way" but more importantly a "why don't we do this like this instead": It really gets people thinking about improvement.