Integrating Performance Measurement and Risk Management

Risk management needs to be informed by real and readily available performance information. But integrating performance measurement and risk management begins at the planning stage. Both planning and risk management are particular views of the future. Planning says “if we invest our resources to conduct these particular activities, these are the impacts, benefits and consequences – i.e. outcomes we can expect”.

Risk management also attempts to look forward, to identify the key risks that may affect the achievement of those outcomes. Of course, in the Public Sector things are seldom this straight-forward. Accountabilities and information flows are often fragmented. If you are a manager in the federal public service trying to comply with the Treasury Board Secretariat's Management Accountability Framework (MAF) you've probably run into this problem.

It seems obvious that the strategic direction and particular business initiatives put forward by planners must have a large part to play in determining the risk profile of an organization. This means that planning and risk management should really be iterative activities e.g. strategic objectives are set, risks identified, and then this must feed back to the planning process, to assess if changes should be made to plans or initiatives to reduce risk.

And it means that an integrated approach to performance measurement and risk management should provide information not only about the degree of success in achieving objectives, but also needs indicators that will raise a flag when identified risk conditions appear. The management team can then make an informed decision about pursuing a risk mitigation strategy.

This is made more difficult if different groups are responsible for different parts of the process. A properly-designed performance reporting governance structure and comprehensive performance measurement reporting plan can provide the context and the forum for reporting risk information and taking action. Appropriate use of information technology to bring different parts of the reporting regime together can also help.

Particularly in the public sector, risks can arise because the nature of our objectives are themselves risky e.g. due to conditions or circumstances we can't control; or we may face risks due to the particular initiatives we choose to enact our strategies, and how well we manage them. An integrated performance measurement and risk management strategy needs to take both scenarios into account.

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