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Finance Ninja and integrating risk into performance management

  • Artigo

I am re-posting this Blog. I wonder if companies will (or do) re-purpose or customize their BI software so that it includes the monitoring of risk, particularly operational risk.

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Related to the series of posts I have been writing about performance management is a Blog post in THE BI Blog, Are you a finance Ninga? This post discusses a research made by Acenture about characteristics of top performing finance organizations (since 2004) drawn from another article called Secrets of the Finance Ninjas.

Finance ninjas states that the masters (master finance ninjas) are 42% more likely (vs. 20% non-masters) to undertake initiatives in advanced and integrated risk management processes and technologies. Masters are also 31% more likely (vs. 13% non-masters) to implement advanced enterprise performance management capabilities.

I earnestly believe that these two disciplines will become more popular as the global business environment and investors demand more secure investments from well performing companies -see my Blog post about reasons for Basel II. The two disciplines both require similar initiatives. In risk management software, there is typically a dashboard that displays a key risk indicator (KRI). The dashboard for performance management software displays KPIs. Both require historical data to predict the future, each require that information and management is owned more by individuals that can do something about it, and so on.

A small video from John Cummings here and an article called Risk-Adjusted Performance: A Primer give more details.

Also, the following is an interesting quote that hints at modifying the software to include risk:

"Relatively few companies have attempted to integrate the two disciplines to create true risk-adjusted performance models. For example, only about one-quarter of organizations have formal performance monitoring that incorporates risk indicators, and only 29 percent do risk-adjusted forecasting, according to the study."

In the article, John discusses the ways to integrate risk into performance management. It's worth reading and worth looking at later as we see companies use PerformancePoint Server for more than performance management.