Developing Key Risk Indicators

DePaul Forum COSO Thought Leadership in ERM May 10, 2011

Mark S. Beasley Deloitte Professor of Enterprise Risk Management Director of the ERM Initiative North Carolina State University

Managing Strategic Performance

Range of Uncertainty

How comfortable are you in how organization manages uncertainty it faces?

Time

Develop Strategies Now

Observe Performance Later

Page 2

KPIs vs. KRIs

Historical Forward Looking

Page 3

Linking KRIs to Risks to Strategies to Objectives

Increased Revenues Fulfill Mission Expense Savings

Page 4

Linking KRIs to Risks to Strategies to Objectives

Strategic Initiative #1 Strategic Initiative #2 Strategic Initiative #3 Strategic Initiative #4 Strategic Initiative #5 Strategic Initiative #6
Page 5

Increased Revenues Fulfill Mission Expense Savings

Linking KRIs to Risks to Strategies to Objectives

Potential Risk Potential Risk Potential Risk Potential Risk Potential Risk
Strategic Initiative #1 Strategic Initiative #2 Strategic Initiative #3 Strategic Initiative #4 Strategic Initiative #5 Strategic Initiative #6
Page 6

Increased Revenues Fulfill Mission Expense Savings

Linking KRIs to Risks to Strategies to Objectives

KRIs KRIs KRIs Potential Risk Potential Risk Potential Risk Potential Risk Potential Risk
Strategic Initiative #1 Strategic Initiative #2 Strategic Initiative #3 Strategic Initiative #4 Strategic Initiative #5 Strategic Initiative #6
Page 7

Increased Revenues Fulfill Mission Expense Savings

KRIs KRIs

Proactive Management of Emerging Risks Trigger Points Trigger Points

Range of Uncertainty

KRIs

KRIs

Time

Initial Strategies

Revise Strategies

Revise Strategies

Page 8

Developing Effective Key Risk Indicators

Leading Indicator Mitigation Activity

Leading Indicator Mitigation Activity

Page 9

Page 10

Page 11

Mark S. Beasley Deloitte Professor of Enterprise Risk Management Director of the ERM Initiative North Carolina State University mark_beasley@ncsu.edu 919.515.6064

www.erm.ncsu.edu