Performance Management and ERM

/ July 15th, 2017/ Posted in Uncategorized / No Comments »

Performance managmement plan as context for risk ID
“A performance management plan is a set of target measures against which actual results achieved by employees are compared. If the system is well designed, it forms a good framework for risk assessment. We can ask, “What is the risk that performance measure X will not be attained?” But this assumes that the target is meaningful.”

Performance measures could be said to lie on a spectrum of data quality from low to high, based on the same criteria applied to statistical and research methods, such as reliability and validity. Often the aspect of performance we really want to track is too impractical to measure, or not attributable to one measurable thing. When management puts too much faith in measures that are mere indicator data, there is the danger that operations staff will alter their behaviour just to “manage to the numbers” (show the desired measured result). A simple example is a call centre that is assessed solely on the basis of call duration. Operators will reduce call times to meet the benchmark, but do so at the expense of service quality.

~ excerpt from Solving the Enterprise Risk Management Puzzle – Secrets to Successful Implementation, p.39

Context for risk ID/risk assessment

“Establish the Context” – Those familiar with the AS/NZ 4360 and ISO risk management standards will recognize that step in the risk assessment process. One practical form of context for the purpose of risk assessment is the Performance Management regime itself.

I had some experience with this when I designed a Performance Management regime for payment systems for Banking/Cash Management Branch, B.C. Provincial Treasury. The data I really needed to track was often too difficult or expensive to collect. But more easily available indicators could be used — as long as the right interpretation to results was applied.

If the Performance Management plan is well developed and accurately reflects goals and values, it forms a useful context for identifying risk.

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