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...