IRM ERM M1U3.2 Objectives

Question 1

The three levels of objective setting

Answer 1

Figure 3.2.1 - The three levels of objective setting suggests that objectives can be set at different levels within the organisation:

In the first instance, organisations must set the overall, organisation-wide strategic objectives. Ultimately, all objectives should be supportive of, and be aligned with, the strategic mission and purpose of the business.

Through the process of delegation, organisations must then agree on compatible tactical objectives, at the level of departments, divisions or business units. These will focus on the implementation of strategy, and these will typically cover timescales of around one to three years.

Finally, the tactical objectives will be further delegated into the operational objectives of teams and even individual personnel, covering a much shorter period of time ranging typically from days to months.

Note that different organisations use different interpretations of the words ‘strategy’, ‘tactics’ and ‘objectives’. When comparing to your own organisation, you may find the same hierarchy in place, but different terminology being used).

Question 2

SMART objectives

Answer 2

Risksa re linked to objectives, because failing to control risks may lead to falling short of objectives and therefore not achieving strategic goals. Ideally objectives should be
SMART
:
SPECIFIC
– be specific about what you want to accomplish
MEASUREABLE
– define the metrics that determine if you meet the goal
ACHIEVEABLE
– do you have the tools/skills needed, if not what action
RELEVANT
- ensure the objective is aligned to the business strategy
TIME-BOUND
– provide a realistic target date for delivery.

Question 3

The Role of Risk in Strategy Selection

Answer 3

There are two additional aspects to enterprise risk management that can have far greater effect on an entity’s value: the possibility of the strategy not aligning, and the implications from the strategy chosen.

The most significant causes of value destruction are embedded in the possibility of the strategy not supporting the entity’s mission and vision, and the implications from the strategy.

Question 4

Definition of the extended enterprise

Answer 4

Our Our definition of the extended enterprise is one in which a number of organisations come together in
order to achieve some outcomes that none of them can
achieve on their own, within the timescale within which
they wish to operate, with the skills available to them.

all businesses consist of a complicated network
of entities that might include multiple-tiered supply
chains, with sub-contracted manufacturing, licensed
intellectual property, outsourced back offices and
complicated routes to market, in essence what we are
calling the extended enterprise.

Question 5

Example of extended enterprise - Rolls Royce & Kidde Graviner

Answer 5

For example, Rolls Royce uses Kidde Graviner (a small firm by
comparison) because Kidde Graviner is the market leader in
fire suppression. While Rolls Royce could have dealt with this
in-house, they believed that the quality of Kidde Graviner’s
product and reputation in this field were of value in the
overall joint endeavour of creating their aero-engines.

Question 6

Need for extended enterprise with examples

Answer 6

Whether it is building a space station in orbit (too big
either for the Americans or the Russians on their own)

or building a hydro-electric plant (too diverse a range
of skills needed for most construction companies to do
this on their own)

or providing services to safeguard
vulnerable children and adults in our society (where
multiple agencies have specific roles to play),

the likelihood is
that multiple organisations will be required in order to
achieve the desired outcomes.

Question 7

Attachment of risk elements

Answer 7

Risks do indeed impact on corporate objectives, but, as your next reading will show, they can also impact on key dependencies, core processes and stakeholder expectations.

We call this the ‘attachment of risk’ and organisations should map out how risks are attached to each of these elements in order to fully analyse their impact.

Key dependencies are the key things that the organisation needs to be successful; they might be internal or external things but in short, they are what the business depends upon for its future success.

Core processes are fundamental to organisational success because they are the means of delivery of strategy and continuity of operations. A core process can be defined as “the collection of activities that deliver a specific stakeholder expectation”.

Stakeholders are the groups of individuals who have a stake in the business, or are affected by what the organisation does – such as investors, suppliers, customers, the wider society and government.