Practical ideas: RISK-BASED STRATEGIC PLANNING, BUDGETING AND PERFORMANCE MANAGEMENT

According to the ISO 31000:2018 principles, risk management is an integral part of all organizational activities. and decision making. Picking up on that important point, risk management should be seen as a management tool designed to improve planning, budgeting, performance management and other core business processes. Risk management also helps management to make more informed business decisions about achieving strategic or operational goals and sometimes may even highlight the need to change the strategy altogether due to an unacceptable level of risk.

Below are just some of the practical ideas to help integrate risk management:

  • Document appetites / tolerances for different risk types in the relevant Board level policies and procedures instead of creating separate risk appetite statements;
  • Identify significant risks and assess their impact on the Company’s business plan and budget;
  • Run risk simulation to determine realistic strategic or operational KPI values;
  • Run risk simulation to determine key budget constraints;
  • Integrate risk analysis into key management, investment and project decisions;
  • Remunerate management based on risk-adjusted performance measures.

Effective risk management increases management confidence in achieving objectives, reduces uncertainty and helps make informed, risk-based decisions. In this section, we provide examples of how risk management can be integrated into:

  • Strategic planning;
  • Budgeting;
  • Performance management;
  • Decision making.

2 thoughts on “Practical ideas: RISK-BASED STRATEGIC PLANNING, BUDGETING AND PERFORMANCE MANAGEMENT

  1. True, I always think that Today’s CRO must help lead the organization to higher levels of performance while assuring the Board and other stakeholders that the company can both and take full advantage of opportunities
    that will help it meet its objectives.
    However the challenge is the Traditional SILOED Approach that exists, Keeping Risk management in silos prevents the complete view of the organization’s risk profile,
    In turn CROs and CAEs should help to revamp the SILOED approach and create a Unified approach to Risk management and audit, that will help each C suit executive oversee their responsibilities with an Optimized end result.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.