White Paper: Integration of Balanced Scorecards with Enterprise Risk Management
In this White Paper, we outline how Veridian Connections Inc. has integrated Balanced Score Cards with their Enterprise Risk Management program. This whitepaper has been authored in partnership with Laurie McLorg from Veridian Connections Inc., a progressive North American utility.
Since the early 90’s, Balance Score Card (BSC) has been used by thousands of successful companies, both big and small, to help align the strategies and activities undertaken by a company with their overall corporate objectives and provide a summary to senior management to increase the transparency of reporting. BSC is widely recognized to provide substantial benefits to senior management and stakeholders of organizations both large and small.
The concept of identifying, assessing and managing the risks of an organization, known as Enterprise Risk Management (ERM), has also been used by successful companies to increase the chance of achieving a company’s objectives. The Deepwater Horizon oil rig explosion in the Gulf of Mexico that so negatively impacted BP, Halliburton and Transocean is an example of a risk that was not planned for sufficiently. An appropriate Action Plan could have drastically reduced the environmental, financial and reputational damage done to these companies.
“A formal risk assessment might have enabled the BP Macondo well team to identify further mitigation options to address risks such as the possibility of channeling; this may have included the running of a cement evaluation log.”
Both management tools are well-recognized and accepted among academicians and more importantly business leaders. They link the high level corporate strategies as determined by the senior leadership team with the day-to-day activities of the employees within the organization. Until now, there has been limited interconnectivity; yet at a fundamental level, they seek the same goal – help the organization achieve its corporate objectives. The integration of these two management tools is a natural step in the evolution of corporate management. We will attempt to illuminate a number of the benefits in this White Paper.
We use a simple technology tool to illustrate how the integration could work and then describe a real-life case study at Veridian that has succeeded in integrating their BSC and ERM programs within the technology solution described.
The resulting integration results in a reduction of time spent on these two important management areas, a more comprehensive picture of the activities a company is doing to achieve its objectives, individual scorecards for all levels of management from senior members to front-line managers and a reporting tool that combines all the information so that management can make more informed decisions.