Last Updated Mar 16, 2010 1:46 PM EDT
But it was lacking a crucial piece, a shortcoming driven home by the economic crisis, says Kaplan. Now the Balanced Scorecard might undergo some changes or additions, Kaplan tells SearchCIO.com:
"If I had to say there was one thing missing that has been revealed in the last few years, it's that there's nothing about risk assessment and risk management. My current thinking on that is that I think companies need a parallel scorecard to their strategy scorecard -- a risk scorecard."The risk scorecard, he continues, would prompt thinking about things that could go wrong, hurdles that could be raised, and ways the organization can get early warning signals to suggest corrective action.
"[Risk management] turned out to be an extremely important function that was not done well by many of the [financial services] companies we talked about earlier. Risk management was siloed and considered more of a compliance issue and not a strategic function. Now we see that identification, mitigation and management of risk has to be on an equal level with the strategic process."Risk management is a hot-button topic all over the economic and political landscape. Retiring Harvard Business School Dean Jay Light has discussed at length the need for business management schools to give students the skills to identify, evaluate and manage risk.
In a recent letter to Berkshire Hathaway shareholders, Warren Buffett said business leaders must not only be better risk managers, but be held accountable:
"A board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control. If he's incapable of handling that job, he should look for other employment. If he fails at it -- with the government thereupon required to step in with funds or guarantees -- the financial consequences for him and his board should be severe."Are you giving a fresh look at risk in your own organization?
Strategy Execution and the Balanced Scorecard (HBS Working Knowledge)