The RBPM framework describes a process from the capturing of the business drivers (the fundamental drivers of value of the particularly industry and organisation) to the delivery of shareholder value.
Sequencing from the identification of the drivers of value to the delivery of shareholder value is through seven disciplines:
1) Set strategy
2) Manage performance
3) Manage risk
4) Align risk to strategy
and an eighth (appetite) which serves as the glue that binds the others together into a unified strategy/risk management approach for these ‘continuous turbulent times’. We do not label appetite a discipline as its influence weaves through the seven identified disciplines.
The RBPM disciplines are described within two inter-related circles.
The left circle (See Above) is about defining and then executing strategy (by managing performance and managing risk). Appetite sits at the heart of both circles. Aligning risk-taking to strategy is a core discipline of the left circle but also serves as the linkage to the right circle.
The right circle (See Above) considers the ‘softer’ disciplines of Risk-Based Performance Management: governance, culture and communications. By ‘softer’ we mean there is a lack of established mechanisms/processes for managing these disciples, which is not the case for the other four disciples. Moreover, although supposedly softer, they are no less important. Indeed, failure of governance and, perhaps more importantly culture is more likely than anything else to lead to the ignoring of risk appetite and the subsequent failure of risk management and as a result the strategy. The RBPM framework delivers stronger governance at both the strategic level (i.e., better tools and structures with which to manage the business) as well as at cascaded levels through the RACI (responsible, accountable, consult, inform) model.