ARM 400 Chapter 4

Question 1

What is a KPI?

Answer 1

A Key Performance Indicator is a measurement that defines how successfully an organization is progressing toward it’s long term goals.

Question 2

What is a critical success factor?

Answer 2

An element, necessary for an organization’s success, that is derived from a strategic objective.

Question 3

What is risk tolerence?

Answer 3

The amount of uncertainty an organization is prepared to accept in total or more narrowly within a certain business unit, a particular risk category or for a specific risk initiative.

Question 4

What are a few examples of financial indicator KPIs?

Answer 4

Operating margin
Net margin
Return on assets

Question 5

What are some examples of staffing indicator KPIs?

Answer 5

Revenue productivity index (income divided by staffing head count)
Employee Retention (percentage change in base period head count after EE turnover.)

Question 6

What are some operations indicator KPIs?

Answer 6

Inventory turnover
Capacity utilization

Question 7

A _______measures the activity tied to a ______. They are interrelated but not the same.

Answer 7

KPI, CSF

Question 8

What is a Key Risk Indicator?

Answer 8

A tool used by an organization to measure the uncertainty of meeting a strategic business objective.

Question 9

What are characteristics of effective KRIs?

Answer 9

Quantifiable
Predictive
Supportive of management decisions
Capable of being benchmarked
Can be reviewed on a regualr basis.

Question 10

KRIs are ____________ in nature versus KPIs, which are _____ in nature.

Answer 10

Leading (predictive), lagging (What has happened)

Question 11

What are some examples of KRI metrics?

Answer 11

Percentage change from prior period
Budget variance percentage
Aged accounts receivable
Aged accounts payable

Question 12

Overall, KRI’s originate from a organizations overall_____?

Answer 12

Goals

Question 13

As a part of a risk management program, KRIs are primarily used to identify ______________ and assess changes in known risks to give an organization time to prevent or minimize losses.

Answer 13

emerging risks

Question 14

How do KRIs help with strategic planning?

Answer 14

They can help define performance targets, business strategies and goals.

Question 15

How can KRIs be applied to balancing risk and return?

Answer 15

KRIs can identify operational areas within the operational areas within an organization the have higher levels of risk. Management can use this information to balance risk and return when making resource allocation decisions.

Question 16

What is business process management?

Answer 16

A systemic, iterative plan to analyze and improve business processes.

Question 17

What is a risk indicator?

Answer 17

A tool used by an organization to measure the level of uncertainty in an activity, project or process.

Question 18

What makes the BPM cycle valuable?

Answer 18

It creates a consistent approach to improving repetitious everyday processes.

Question 19

How does BPM differ from project management?

Answer 19

BPM deals with everyday processes whereas project management deals with unique projects.

Question 20

What are the overall goals of BPM?

Answer 20

Improving efficiency
Managing risks
Increasing profitability through lifecycles of continual measurement and feedback.

Question 21

What are the 5 steps of the BPM lifecycle?

Answer 21

1. Design/redesign process
2. Model scenarios
3. Execute process changes
4. Monitor results
5. Optimize process

Question 22

For the BPM lifecycle, describe the design/redesign step.

Answer 22

in this step the identified processes are designed or redesigned by considering workflows , affected personnel, reporting procedures, and operating requirements. Workflows include all of the person-to-person, person-to-system, or system-to-system interactions.

Question 23

For the BPM lifecycle, describe the model scenarios step.

Answer 23

In this step, variables are applied to the process design to identify the response to various what-if scenarios. It is hoped that this will enable the organization to map out the most efficient process.

Question 24

For the BPM lifecycle, describe the execute process changes step.

Answer 24

Apply the proposed changes to the process.

Question 25

For the BPM lifecycle, describe the monitor results step.

Answer 25

The process is tracked, and statistics on its performance are gathered and compared with KPIs

Question 26

For the BPM lifecycle, describe optimize processes step.

Answer 26

If the monitoring stage reveals bottlenecks, or potential opportunities for cost savings, this step is where those improvements are made.