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Strategic Business Management by Gary Cokins

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12

THE INTEGRATION OF ENTERPRISE RISK AND ENTERPRISE PERFORMANCE MANAGEMENT

Among businesses, there is increasing interest in the integration of enterprise risk management (ERM) and enterprise performance management (EPM), but there is confusion and lack of consensus about what each of them is, let alone how to integrate them. Finding the best way to apply meaningful measurements adds to the problem. Probably most disturbing is recent research that shows that no matter how interested in ERM and EPM they may be, executives are not adequately funding these functions, possibly due to fears that it will reduce profits. In addition, they are not allowing risk managers—or those whose function it is to assess risk—a seat at the executive table. Risk managers do play a valuable role within an organisation, however, by focusing on risk across the enterprise and mitigating the chance of potential risks to protect the organisation’s profits.

An organisation needs both velocity with steering and control. The former comes from EPM (eg, strategy, key performance indicators [KPIs], alignment, customer profitability analysis, business intelligence, business analytics, rolling financial forecasts, etc) and the latter comes from ERM (eg, risk appetite statement, key risk indicators [KRIs], key control indicators, risk mitigation). Unrestricted EPM is dangerous without some limits. It is like driving too fast on a mountain highway with sharp turns. ERM is the accelerator and brake pedal while EPM ...

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