Here’s how risk management and performance management can be integrated more effectively, according to PricewaterhouseCoopers principal Joe Atkinson:

At a practical level, companies adopt a principles-based approach through which the approach to integrating risk and performance management is driven by a common set of principles (or capabilities) that are shared across the organization. These principles — established at the top of the organization – are implemented by what he describes as “levers”: people, processes, information, and technology.

Before the pieces can be assembled, however, Atkinson stresses the need for commitment from the top of the organization. “Key to that commitment is the development of risk management principles that govern the identification, evaluation, and acceptance of risk,” he explains. “These principles form the foundation of the risk culture of the organization.”

Next comes change, in the form of a formal initiative. Atkinson believes that the primary challenge in executing the initiative is cultural. To address this challenge, he suggests asking some probing questions:

• Do you have the right discussions about risk?

• Is risk-taking rewarded when it goes well and punished when it does not?

• Does the technology and process environment produce actionable information that provides sufficient clarity into the risks you are taking?

“The most important players in the successful integration of risk management and performance are the most senior executives in the organization — those who set the tone at the top,” Atkinson adds. “This would naturally include the Board, the CEO and CFO, and the chief risk officer. But the critical element in effectively connecting risk and performance is to drive integration into the strategy setting environment — this means that business unit leaders responsible for strategic decision-making and business performance must be engaged.” ###

See “Linking Risk Management to Performance Management: Part 1″

Expert Video Feedback from Arnold Tholstadt:

According to another blog on BFFB, Arnold Hanish, the vice president of finance at Eli Lilly, says that the biggest concern for finance professionals is the current uncertainty surrounding a hard adoption date: “Remove that uncertainty,” he urges, “because it will take large, global companies at least two years to prepare for conversion.” We strongly agree!

Read Deloitte’s D.J. Gannon’s response below (also, see D.J.’s video here):

Arnold, you’re not alone. One of the key issues of commentary on the SEC’s road map is the need for certainty around the timing of adoption. more

The deaths, sickness, fear, and loss of community and business activity notwithstanding, the current flu pandemic is serving a valuable and necessary educational role. And our public and private pandemic preparedness and response capabilities should emerge in a much more robust state as a result.

For example, the following educational nugget came out of the mouth of a World Health Organization (WHO) spokesperson minutes ago and is already on my laptop screen: “The definition of a pandemic is widespread disease. The word carries no connotation of whether it is severe or mild. In the past, we’ve had both severe and mild pandemics.”

Thanks to the blogging of Wall Street Journal health writer Jacob Goldstein, who is covering (live) a presentation by the director of the WHO Initiative for Vaccine Research, some of us learned an important distinction.

Yes, our organizational, individual, and media responses to the flu outbreak are imperfect. In the English language, “pandemic” sounds and looks a lot like “panic.” Reactions are part of the learning process. Use this event to help strengthen your organization’s BCM and disaster recovery capabilities. ###

The importance of sophisticated risk management and GRC has reached an all-time high, but if these capabilities are going to become sustainable and integrated facets of corporate strategy, a link needs to be made.

That’s why Joe Atkinson, a principal with PricewaterhouseCoopers, is a vocal proponent of the need to wed risk management with performance management.

“Ultimately,” Atkinson wrote in an e-mail exchange we conducted this week, “the purpose of integration is to allow companies to become more resilient to risk – to be able to identify and manage risk with confidence and clarity. By integrating risk management with performance, companies can begin to systematically link risk and reward, facilitate strategic decision-making, improve operations, and reduce the overall costs of doing business.”

I think Atkinson’s observation is spot-on, and I asked him what this integration looks like inside an organization. more