Academic journal article Journal of Management Research

Toward a Conceptual Framework for Integrating Enterprises Performance and Risk Management

Academic journal article Journal of Management Research

Toward a Conceptual Framework for Integrating Enterprises Performance and Risk Management

Article excerpt

Abstract

The aim of this paper is to demonstrate the integration between performance and risk management through the use of balanced scorecard performance measurement tool. Both performance and risk management in organization's evaluation have several benefits for the organization's activities and, if applied properly, it can help an organization to reach its anticipated objectives. This research consists of two parts. In the first part, we present a review of the recent theoretical literature related to 1) the concept of performance and risk management; 2) the BSC as both performance and strategic measurement tool; 3) the BSC as performance evaluation tool in higher education institutions; 4) the interaction between risk and performance management in the context of different applications. The second part proposes a framework aiming at continuously controlling the integration of performance and risk, and providing information flow and feedback for future resources utilization and planning.

Keywords: Performance measurement, Risk management, Balanced scorecard, Key performance indicators, Higher education.

1. Introduction

Ever since the concept of business was established and presented the way we know it nowadays, the only way to measure performance in organizations is focusing on the traditional performance measurement that deals mainly with measuring performance in more tangible sense. To measure profit, loss and, liabilities the balance sheets and income statement are used. In fact, these measures provide managers and decision makers with only an insight view about the organization financial performance ignoring many other aspects that makes the difference between success and failure (Person, 2009). These financial measures were accepted in times where some critical factors still haven't been emerged yet. The new critical factors are affecting today's business one way or another; like the effectiveness of internal processes, the capabilities and skills of human resources, the level of innovation and growth that organizations attain due to research and innovation, and customer satisfaction that is very important these days considering the highly competitive environment and the rapidly changing business dynamics (David, 2010).

The concept of Balanced Scorecard (BSC) was presented by Robert S. Kaplan and David P. Norton, in their Harvard Business Review article "The Balance Scorecard - Measures that Drive Performance", as performance measurement framework that consists of non-financial performance measures along with financial metrics to provide managers and executives a more "balanced" view of organizational performance (Kaplan & Norton, 1992, 2004). These non-financial measures are used to evaluate and monitor performance of intangible dimensions in organizations.

It is known that organization is facing many external and internal challenges. Combining external threats and internal weaknesses together can put at risk the existence of the organization and harm its competitive situation. To manage and control these unfavorable challenges, organizations need a structured approach to face it, which is known as risk management (Hopkin, 2010). Risk management refers to a set of methods and processes used by organizations to control risks and catch opportunities to achieve the organizational objectives. Risk management also provides a framework for management to work properly, and it is conducted by identifying significant events relevant to the organization's objectives, assessing them in terms of likelihood of occurrence and impact if event occurs, selecting a response strategy, and monitoring them by identifying and proactively addressing risks and opportunities (Hopkin, 2010).

The main focal point of this paper is to link performance and risk management through the continuous evaluation of the organization performance statuses using the BSC as a measuring and evaluating performance tool. …

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