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The Decision Factor offers insightful comments and observations on analytics—from views on new technology approaches and market dynamics to the latest industry trends driving demand for faster, smarter information analysis. This blog contains personal views, thoughts, and opinions from SAP employees, mentors, and friends working in the area of analytics. It’s not endorsed by SAP nor does it constitute an official communication of SAP.

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Key Risk Indicators in a Sound Risk Management Process: What Are They Really?

For many people, risk management helps companies make sure that their compliance risks are monitored and that they have controls in place to take care of them.

Personally, I strongly believe that risk management is much more than that – it helps companies really steer their business, avoid roadblocks, seize opportunities, and react appropriately.

Key Risk Indicators (KRIs) are indicators of the possibility of a future adverse impact on the organization. They serve as an early warning system to the stakeholders and enable preventive action to be taken directly on the risks and opportunities flagged.

In that sense, they …

Dead Rats in Risk Management

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It seems that almost every day I read blogs or articles in professional journals lamenting the fact that business executives aren’t supporting risk management initiatives in their business or not consuming the reports and conclusions of their risk management professionals.

In addition, we see evidence regularly in the press that risk management is failing and that catastrophic and harmful losses persist. There’s a reason for this. Risk management practices embrace beliefs and methodologies that create apparently” profound reports—but instead it’s ponderous and essentially useless information. It results in inert, albeit attention grabbing, charts and graphs.

I call them dead …

Dead Rats and GRC

Dead Rats and GRC

GRC Quiz:

Please select the best answer:

1. A flight attendant in a commercial airliner notices smoke coming from the stove in the rear galley. He is trained to:

a. Immediately contact the pilot and report a “material weakness” in the smoke detection system.

b. Immediately contact the pilot and report smoke coming from the stove in the galley.

2. You are awoken in your home in the middle of the night by the sound of intruders. You should:

a. Immediately call the police and report a “key risk indicator.”

b. Immediately …

GRC Strategy Quadrant: Understanding Type D Risks

GRC Strategy Quadrant: Understanding Type D Risks

A Better Way to Classify Risks

There’s nothing new about classifying risks by category – strategic risk, operational risk, and so on. But I’m suggesting the strategy for managing risks is dramatically different for each section of the quadrant. And we make mistakes when we use a response strategy that doesn’t match the risk type.

In my previous blogs, I illustrated the GRC Strategy Quadrant, which classifies risks based on the risk “appetite” of the business and the perceived risk level, and I explained Type A, Type B and Type C

Misunderstanding Risk and Controls

Misunderstanding Risk and Controls

Time and again I hear that risk management is seen as something that is required by the regulators, perhaps by the board or top management, but is not seen as something that helps individual managers succeed.

Time and again I hear that boards are not receiving the information they need to know whether the risks to the organization’s strategies are managed appropriately.

Time and again I hear of organizations that are satisfied (i.e., complacent) with the periodic management of a list of significant risks — as if risks are somehow less dynamic than the business environment.

Time and again I …

GRC Strategy Quadrant: Understanding Type C Risks

Misunderstanding Risk and Controls

A Better Way to Classify Risks

There’s nothing new about classifying risks by category – strategic risk, operational risk, and so on. But I’m suggesting the strategy for managing risks is dramatically different for each quadrant. And we make mistakes when we use a response strategy that doesn’t match the risk type.

In my previous blogs, I illustrated the GRC Strategy Quadrant, which classifies risks based on the risk “appetite” of the business and the perceived risk level, and I explained Type A and Type B Risks in detail.

Today, I’m covering Type C …

GRC Strategy Quadrant: Understanding Type B Risks

GRC Strategy Quadrant: Understanding Type B Risks

In a recent blog, I illustrated a GRC Strategy Quadrant that I think can be used to tailor risk management strategies to different types of risks.

A Better Way To Classify Risks

There’s nothing new about classifying risks by category – strategic risk, operational risk, and so on. But I’m suggesting that the strategy for managing risks is dramatically different for each quadrant. And we make mistakes when we use a response strategy that doesn’t match the risk type.

In last week’s blog, I defined the four types of risks, and explained Type A in detail. …

GRC Strategy Quadrant: Type A Risks Explained

GRC Strategy Quadrant: Type A Risks Explained

In a recent blog , I illustrated a GRC Strategy Quadrant that I think can be used to tailor risk management strategies to different types of risks.

A Better Way To Classify Risks

There’s nothing new about classifying risks by category—strategic risk, operational risk, and so on. But I’m suggesting that the strategy for managing risks is dramatically different for each quadrant.

The quadrant classifies risks based on the risk “appetite” of the business and the perceived risk level. I will illustrate my points over the next few blogs, starting with Type A risks today.

Risk-Driven, Governance Risk and Compliance Oversight

GRC Strategy Quadrant

Risk management continues to fall short of expectations. Surveys show boards and senior executives believe risk management is important, but also reflect an overwhelming dissatisfaction with the implementation initiatives.

Adopt a Value Driven Approach to Risk

Recently, in an attempt to make risk management more relevant and sustainable, I wrote a blog aimed at focusing risk management on value driving activities of the business (“Driving Value with Risk Management”). My belief is that too much risk management activity is spent on identifying and assessing risks in low-value business processes or in objectives that don’t drive business …

Driving Value with Risk Management

Driving Value with Risk Management

Real success for risk management can only come from creating value. Yet risk management practices have largely failed the value add test.

Defining Value

What drives value in your business? To find out, you need to learn how equity analysts make buy/sell recommendations. Value drivers may not be tangible and they may not be on the balance sheet, but they’re very real.

For example, in the mining and metals industry, proven mineral reserves drive value. In the airline industry, one equity analyst concluded that the quality of customer experience drove value. For a railroad long-term contracts with coal shippers are …