Gauging the value of your organisation’s risk and performance management

Although there can be an infinite number of reasons for an organisation to evaluate its risk and performance management, two main reasons that apply across-the-board, include:

1. You need to understand where your organisation stands in order to plan where it should go.
2. Executives want to know if what’s in place or being done is adding value.

In reviewing this year’s State of Risk Oversight report from NC State, I came across an extensive list of questions aimed at helping organisations understand their current risk management capabilities.

But after taking a more in-depth look at the list and the report in general, the questions seemed to be entirely focused on risk, or “threats” to the organisation.

As you may know from some of my recent posts and commentary from experts, simply focusing on what can go wrong is not a recipe for success in today’s dynamic, fast-paced world. At a high level, enterprise risk management shouldn’t be about preventing failure but instead about ensuring success. Risk and performance management must look at the whole picture.

Because in the end, performance is what executives care about.

Risk lists have several drawbacks. They not only focus on what can go wrong, but they are also overwhelming and not useful for decision-making in many cases. Risk lists are also backwards looking and usually only tell executives what they already know.

Coincidentally, a recent post on Norman Marks’ blog got me to thinking a little more about decision-making and performance. He states that the core of effective risk management is how an organization makes decisions. Simply reviewing meeting minutes and other records though will not be helpful in understanding this.

Instead, Norman explains that risk practitioners should consider “…how the decision-makers know what risks the board and top management wants them to take.” Below is a screenshot of Norman’s sample questions.

Additional questions for gauging the value of your organization’s risk and performance management

The questions outlined in Norman’s article are a great starting point for understanding how your organization makes decisions.

However, there are other issues around culture that you as a practitioner must understand in order to gauge the effectiveness and value of risk activities in your organization.

With that in mind, I would like to offer the following three general questions to ask in addition to Norman’s questions:

1. How involved is management in defining behaviors they want to see in the organization?

2. Has management reached an agreement on how much risk to take to achieve goals? Is the Board on the same page?

3. What methods are used by the organization to understand risk before making decisions?

These of course are just some generalized questions to get you started…

In the end, most questions for gauging the value of risk and performance management will be organization-specific. Example questions like the ones above or in Norman’s article are a good start.

However, only someone with some level of understanding of your organization’s decision-making process will be able to articulate questions aimed at gauging the value of any current risk and performance activities.

When developing your questions though, keep the following in mind…

Be deliberate about each word in a question…

The following video from performance coach Todd Herman explains how just one word can either change the meaning of something or narrow the scope of the inquiry.

While coaching athletes, public figures, or business leaders, Todd doesn’t necessarily listen for the content of the question, but rather the specific words people use to describe a situation. Understanding these words provides a glimpse into the paradigms and ways people view business and life in general.

For example, if someone uses the word “allow,” they are automatically placing restrictions on possible answers without even knowing it.

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