|Figure 1: The reasons why we bother with Risk Performance Benchmarking|
The recent economic downturn has provided numerous examples of poor risk management performance and the speed with which some major corporations met their demise has rocked the confidence of investors. In many cases, the public had little if any, warning prior to the collapse of these organizations. Only when the impact of management mistakes had crystallized on the balance sheet (and when it was far too late to do anything) did the full magnitude of the problems become clear.
The release of ISO31000 Risk Management Standard in 2009 heralded in a new era of potential standardization which among other things, can help organizations measure the quality of their risk management and to do ‘apples for apples’ comparison from year to year or across industry sectors. The first step however is to build a risk management performance scorecard and unfortunately, ISO31000 standard is relatively silent on exactly how to do that.
This blog (the precursor to a book on the subject) addresses a number of methods, examples and guiding principles for developing effective KPIs and scorecards to support and optimize the management of risks. It builds on our 50 years of experience in building risk management performance in a range of industries. Between us (Julian Talbot and Miles Jakeman) we have built risk performance tools for resources companies in Africa, the aviation sector in Asia, the $30 billion Australian Department of Defence and a host of other organizations. The tips, tools and lessons from these experiences have been condensed into a single practical book on risk performance benchmarking.