Total Quality Management (TQM)
A management approach focused on long-term success through customer satisfaction, based on the participation of all members of an organization in improving processes, products, services, and culture. TQM principles, particularly as articulated by W. Edwards Deming and Joseph Juran, emphasized continuous improvement, customer focus, and employee involvement. TQM represents an important historical influence on RBPM, especially in its recognition that quality and performance improvement require cultural change rather than just technical solutions.
Three Lines of Defense
A model for organizing risk management responsibilities within an organization:
- First line: Business units that own and manage risks in their operations
- Second line: Risk management and compliance functions that oversee risk frameworks and challenge first-line activities
- Third line: Internal audit that provides independent assurance on risk management effectiveness
In RBPM, the three lines model is complemented by the RACI governance approach to create clear accountability for risk management while promoting appropriate challenge and oversight throughout the organization.
Taylorism
The scientific management principles developed by Frederick W. Taylor in the early 20th century, emphasizing standardized work methods, detailed instructions, output-based incentives, and separation of planning from execution. Taylorism treated workers as interchangeable parts in industrial processes, prohibiting their involvement in process improvement. While these principles greatly improved manufacturing efficiency, they created rigid organizational structures poorly suited to knowledge work. RBPM represents a post-industrial approach that integrates strategic thinking and risk awareness throughout the organization rather than concentrating it at the top.
Tail Risk
The risk of extreme events occurring with low probability but high impact. Tail risks represent the outer portions of a probability distribution, typically three or more standard deviations from the mean. Examples include major natural disasters, terrorist attacks, or systemic financial crises. In RBPM, tail risks require special consideration through scenario planning, stress testing, and contingency planning, even when their probability is low. Management teams should regularly conduct "tail risk meetings" to discuss potential high-impact, low-probability events and appropriate responses.