Consulting financiers offer an abbreviated, practical guide to risk management via performance benchmarking.
This overview proves, at the very least, that an abundance of words is not always necessary to explain a high-level business concept. In a scant 50 pages, Talbot and Jakeman describe and dissect performance benchmarking, here defined broadly as “comparing your organization’s processes and risk management performance against internal measures, industry standards, and best practices from other industries.” The authors focus primarily on Key Performance Indicators (KPIs) because using them is “a key strategy for shaping and defining desired behaviors and outcomes—and, indeed, of managing operational risks.” In addition, Talbot and Jakeman cover performance standards, define performance and establish a reporting framework. A particularly helpful chapter discusses how to present KPIs to various audiences. While the authors emphasize the importance of a visual presentation, the visual aids needn’t be complicated. Talbot and Jakeman refer to the fact that they built a security-risk-performance scorecard for a multibillion-dollar organization using nothing more than Microsoft Excel. Despite the book’s brevity, it is enhanced with numerous figures illustrating causal links for KPIs, lag vs. lead indicators, KPI performance standards and more. Additionally, Talbot and Jakeman reference real-world examples throughout the text. The authors are careful to point out that, despite their value, KPIs require considerable thought in the development stage. One issue, for example, is to be certain KPIs are measuring the right things and addressing the underlying causes: “When things go wrong, it is tempting to allocate blame, ‘kick to contractor,’ or try to dodge responsibility. Unless the KPIs are truly meaningful and can specifically identify poor performance, this strategy is likely to be counterproductive.”
Given the authors’ considerable experience in this targeted area, business managers interested in managing risk will find this well-written guide of special value.