Knowledge Age
The post-industrial economic period characterized by a shift from physical production to knowledge-based services and innovation. In this era, competitive advantage derives primarily from intellectual capabilities rather than physical assets or access to raw materials. The knowledge age brings both opportunities and challenges for organizations, with rapidly evolving technology, complex global networks, and accelerated information exchange creating more dynamic risk environments. RBPM was developed specifically to help organizations navigate the uncertainty and complexity of the knowledge age.
Key Risks
The most significant threats and opportunities that could impact an organization's ability to achieve its strategic objectives. These are the risks that warrant closest attention from senior management and the board due to their potential impact on value creation. In RBPM, key risks are identified at the level of strategic objectives and monitored through Key Risk Indicators. They are regularly reassessed as internal and external conditions change, with emerging risks promoted to key status when warranted.
Key Control Indicators (KCIs)
Metrics that measure the effectiveness of controls implemented to mitigate risks. KCIs provide insight into whether controls are operating as designed and achieving their intended risk mitigation effects. Examples might include the percentage of compliance exceptions, control testing failure rates, or the frequency of control overrides. In RBPM, KCIs complement KPIs and KRIs to provide a comprehensive picture of performance, risk, and control effectiveness. They help organizations determine whether their control environment is adequately supporting the pursuit of objectives within appetite boundaries.
Key Risk Indicators (KRIs)
Metrics that provide early warning signals of increasing risk exposure in various areas of an organization. KRIs track changes in risk profile and help predict potential risk events before they materialize. Examples might include staff turnover rates (indicating operational risk), customer complaint trends (indicating reputational risk), or liquidity ratios (indicating financial risk). In RBPM, KRIs work alongside KPIs and KCIs to provide a comprehensive view of strategic progress, risk position, and control effectiveness.
Key Performance Indicators (KPIs)
Quantifiable measurements that gauge an organization's progress toward achieving its strategic objectives. KPIs track performance against targets and signal when interventions may be required to address performance gaps. In RBPM, KPIs are selected based on their relevance to strategic objectives and should include both leading (predictive) and lagging (outcome) measures. Effective KPIs provide actionable information that triggers performance conversations and improvement initiatives when performance deviates from expectations.
Key Business Drivers
The critical variables that disproportionately influence an organization's success or failure. These fundamental drivers of value vary across industries and organizations. Examples might include technological innovation capabilities, access to capital at competitive rates, regulatory frameworks, or demographic trends. In RBPM, key business drivers form the foundation for establishing risk appetite, as they represent the factors most crucial to value creation. Understanding these drivers helps organizations focus their strategy and risk management efforts on the areas of greatest impact.