Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader...

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Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management [email protected] © pm2Consulting.com 1

Transcript of Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader...

Page 1: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Risk ScorecardMaking risk visible and actionable….

Brett KnowlesCMA Foundation Thought Leader forPerformance MeasurementPerformance [email protected]

© pm2Consulting.com1

Page 2: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

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Our clients have been profiled by the Thought-Leaders

Over the last 10 years, every book written by the founders of the Balanced Scorecard, Drs Kaplan and Norton have profiles our clients.

Page 3: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Four Clients have become Kaplan-Norton Hall of Fame Winners!

Hall of fame Winner – 1999. Quadrupling of share price, Growth 30% above industry, exceptional customer and employee satisfaction.

Hall of fame Winner – 2001. 8-Fold increase in share price, ground-breaking development of intangible asset measurement, exceptional stakeholder satisfaction.

Drs Kaplan and Norton’s prestigious Hall of Fame award, presented by Kaplan & Norton to the best scorecards in the world.

Hall of Fame Winner – 2004. Breakthrough performance results including average annual revenue growth of 20 percent, net income improvement from $19.4 million to $100.9 million.

Hall of fame Winner – 2011. In three years revenues grew 8%, productivity 8.5%, and profit 27%. Customer satisfaction is up 13% and employee engagement is up 12%.

Datacraft

Page 4: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

9) Strategic Management Practices

Risk Scorecard’s Location in the e-MAGs

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Strategy

1) Strategy Model Performance Metrics

2) Balanced Scorecard

Core Processes

Process Improvement

Initiatives

5) Initiative Strategic Performance Analysis

4) Strategic –Organization

Design

6) Performance Dashboards

7) Process Improvement Management

8) Accountability & Compensation

3) Process Strategic Performance Analysis

Risk Ledger 10) Risk Scorecard

Page 5: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Risk Scorecard

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RISK ELEMENTS

1 2 3 4 5 6 7 8

A

B

C

D

STRATEGICGOALS &

PRIORITIES

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The Risk Scorecard

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RISK ELEMENTS

1 2 3 4 5 6 7 8

A

B

C

D

STRATEGICGOALS &

PRIORITIES

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The Risk Scorecard

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RISK ELEMENTS

1 2 3 4 5 6 7 8

A

B

C

D

STRATEGICGOALS &

PRIORITIES

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The Risk Scorecard

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RISK ELEMENTS

1 2 3 4 5 6 7 8

A 10%

B 50%

C 20%

D 20%

STRATEGICGOALS &

PRIORITIES

Page 9: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Risk Scorecard

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RISK ELEMENTS

1 2 3 4 5 6 7 8

A 10%

B 50%

C 20%

D 20%

STRATEGICGOALS &

PRIORITIES

Page 10: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Risk Scorecard

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What benefit would this offer your leadership team?

Page 11: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Benefits to the Leadership Team

Visibility of the risks Alignment around criticality of each

risk Ability to focus on the few Actionable information

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Page 12: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Risk Scorecard

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What benefit would this offer your Board?

Page 13: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Benefits to the Board of Directors

Confidence in the Leadership Team Visibility of risks Alignment and support with the

Leadership Team Ability to focus on the few

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Page 14: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Risk Scorecard

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What benefit would this offer your Investors?

Page 15: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Benefits to Investors

Confidence in the Leadership Team Visibility of risks Ability to take risks into account

when determining risk tolerance

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Page 16: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Risk Scorecard

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If you could build this next week, would you?

Page 17: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

USE CASE EXAMPLE

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Page 18: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

STRATEGY

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Page 19: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Overall Process

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STRATEGY RISKS

STRATEGIC RISK REGISTER

RISK SCORECARD

Page 20: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

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Frederick Industries Story

Frederick

Page 21: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

CU

STO

MER

SIN

TER

NA

LEN

AB

LER

SFI

NA

NC

IAL

v1

F1: Profitable Growth

C1: Build Loyalty

C3: Quality ProductC2: Low Price

E2: Embrace Change

I1: Continuous Improvement

E3:Promote a Safe Work Place

E1: Invest in Our People E4: Leverage Technology

I2: Develop New Products

I3: Improve Inventory Management

F2: Low Cost Producer

I4: Anticipate Customer Needs

C4: Great Service

5% 5%

3%

15% 4% 4%

16%

5% 10% 15%

6% 6%4% 4%

To be our customers’ supplier of choice by providing a quality product with exceptional service at a competitive price. Frederick

Page 22: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Overall Process

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STRATEGY RISKS

STRATEGIC RISK REGISTER

RISK SCORECARD

Page 23: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

RISK CATEGORIES

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Page 24: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

There are countless Frameworks…

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Page 25: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

STRATEGIC RISK ASSESSMENT

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Page 26: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Your Strategic Risk Assessment

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STRATEGY RISKS

STRATEGIC RISK REGISTER

RISK SCORECARD

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Strategic Risk Analysis

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Page 28: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Strategic Risk Analysis

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Page 29: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Strategic Risk Analysis

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Page 30: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Strategic Risk Matrix

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Low impact/Low probability – Risks in the bottom left corner are low level, and can often be ignored.Low impact/High probability – Risks in the top left corner are of moderate importance – if these things happen, you can cope with them and move on. However, you should try to reduce the likelihood that they'll occur.High impact/Low probability – Risks in the bottom right corner are of high importance if they do occur, but they're very unlikely to happen. For these, however, you should do what you can to reduce the impact they'll have if they do occur, and you should have contingency plans in place just in case they do.High impact/High probability – Risks towards the top right corner are of critical importance. These are your top priorities, and are risks that you must pay close attention to.

Page 31: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

RISK SCORECARD

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Page 32: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Risk Scorecard

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STRATEGY RISKS

STRATEGIC RISK REGISTER

RISK SCORECARD

Page 33: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Building the Risk Scorecard

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Page 34: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Pulling in the Impact Estimates

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Page 35: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Finding Leading Indicators

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Leading indicator of that aspect of risk occurring.

In this example, a leading indicator of the ERP Implementation Failing on the Strategic Objective Profitable Growth might be:• ERP Customer Profitability Roll-up vs. non-ERP roll-up• ERP Revenue growth projections based on ERP numbers

Page 36: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Graphing the Impact

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Graphical representation of the leading-indicator’s projection of risk that is occurring with respect to that strategic objective.

(Strategic Weighting) * (Impact) * (Leading Indicator Performance)

Page 37: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Understanding the Graphs

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Even though they both have a risk-impact of four and a poorly performing risk indicator, because C4 has a weighting of 4% it has a shorter bar-graph than I1 with a weighting of 16%

Page 38: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Looking at Each Risk

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Providing the Predictive Indicator for each risk is the sum of:

(Strategic Weighting) * (Impact) * (Leading Indicator Performance) across all strategic objectives.

Page 39: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Impact of Strategic Weighting

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Page 40: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

The Impact of Strategic Weighting

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Page 41: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Key Risk Points

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Page 42: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

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Page 43: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

NEXT STEPS

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Page 44: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

Next Steps

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1. CMA Risk Scorecard

2. RiskScorecard.net

Page 45: Risk Scorecard Making risk visible and actionable…. Brett Knowles CMA Foundation Thought Leader for Performance Measurement Performance Management Brett.Knowles@pm2Consulting.com.

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