Section IV: Business Risk Management Flashcards
Define what a Key Performance Indicator (KPI) is.
Measures how an individual, team, or organization is performing as they work towards their goals.
What is the difference between a Leading and Lagging KPI?
A Leading KPI measures something that starts to change before an org moves in a specific direction whereas a Lagging KPIs are measured after a change is made.
Most KPIs are lagging.
What are the three Financial KPIs?
- Net Margin
- Operating Margin
- Return on Assets
What are the two Operational KPIs?
- Capacity Utilization
- Inventory Turnover
What are the two Staffing KPIs?
- Employee Retention
- Revenue Productivity Index
Define what a Critical Success Factor (CSF) is.
Factors that are essential to reaching objectives. They focus on strategic objectives.
What is the relation between a KPI and CSF?
A KPI should measure its progress towards a CSF.
Define what a Key Risk Indicator (KRI) is.
They identify and measure possible losses.
What are the two types of KRIs?
- Leading Indicator (KRIs are always leading, whereas KPIs are typically lagging)
- Volatility (risk involved in company trying to reach goals)
What are four common KRIs?
- Aged Accounts Payable
- Aged Accounts Receivable
- Budget Variance Percentage
- Percentage Change
What are the eight places to look for risks and possible KRI metrics?
- Expectation of Stakeholders
- Internal and External Experts
- Legal Requirements
- Loss Experience
- Policies of the Company
- Risk Assessments
- Strategies and Objectives
- Trade Publications and Loss Registries
What are the 8 defining characteristics of an effective KRI?
- Based on Data
- Based on Objectives
- Benchmarked to Industry and Org Standards
- Helps Managers Make Decisions
- Measured Objectively
- Applied through Org
- Predictive use of KRI
- Reviewed on regular basis
What are the seven common uses for KRIs?
- Clarify Expectations
- Document Compliance Efforts
- Enable Strategic Planning
- Balance Risk & Return
- Improve Work Environment
- Measure Risk
- Provide Perspective
In what ways does a BPM (Benefits Process Management) improve processes?
- Improving Risk Management
- Increasing Efficiency
- Incorporating New Technology
What are the four primary benefits of BPM?
- Helps use resources efficiently
- Helps use technology efficiently
- Provides decision-makers data on how efficiently processes function
- Speeds up organizational response to external pressures
