Translating Strategy into Performance Using the BSC to Execute China Stategy Integrating the BSC and COSO ERM FrameworksINTEGRATING THE BALANCED SCORECARD AND COSO ERM FRAMEWORKS netay merely citethe Enron egy Afterall, risk sa prerequisite wo retorn, Tare that Ted to Arthor Thus, as many CEOs turn thei attention fderse's collapse or the to new geowth strategies in the wake of fares rade Nick Leeson’ corporate scandal, there isa significant Fictitious transactions in interest in how to align risk management 1995, which singk-handedly brought doven with strategy. the 200-year-old Barings Bankyto explain why risk management is today regarded as Vncatibe mos critically important cor- The rationale for inking BSC porate actvitics. Yet, while these well and isk management Enown corporate scandals. may have Risk is commonly defined as “the likeli Contributed'to making executives more hood that some factor or event will pre Fisk averse, mos ecognive that risk ie vent an organization from achieving its evessary parte enecutingbusiness strat objectives Organizations face risks nthe ‘Sours of implementing strategy or oper tions. Consequently, ane can clearly fticulatethe strategy-one has a solid foun- dation for implementing isk management This leads ton important question: would ithe possible to take the Balanced Scare Card {BSC}, strategy managemeat 595: temand integrate t with risk management toliak strategy management ad isk man agement? This article studies the feasbil ity of integrating ASC with the Committee ff Sponsoring Organizations forthe Tread tray Commission {COSO) Enterprise Risk Management (ERM), the framework for state-of the-att risk management, similar Torthe way the BSC cam be integrated with t variety of business management frame tworks and methods.{xpandingthe“hatance” concept ot BSE. As itt name suggests, one of the BSC ‘unique functions is balancingantomber of mutually supporting strategic objectives that at timesare in a trade-off relationship with each other One classic example ofthis divides strategy into drivers und ostcores ting the four BSC perspectives of;fnan- ‘al customers/lients, ternal processes, tnd employe learning ond growth prac tice, the BSC helps executives understand thatthe investments they make in employ tex and processes today wil ealtin pot itivebonelits to customers and shareholders Another sommon balance function por taine ta organizing the strategie themes of Pradact leadership, customer stimcy, ow fost operations, and system lock-in select ingwhich one to implement ori the event that more than one is to be implemented, tlarifying how to prioritize among them DOne can point to indicators that are finan tial versus nonfinancial, internal verses sternal and leading (driver) versus lag ing (outcome) acther examples the BSC Balance functionality. As the experience from thousands of BSC implementations accumulates organizations can tra ea va tty of case, tols, and templates tat help analyze this question of balance However theres stil an undeveloped area within this concept of Balance thats ase Ful for organizations to consider the bal ance between vale creation (ep. utack”) through strategy implementation and the sveidance of valve destruction, namely isk management (eg. "delense"). Fev org nizations explicitly incorporate the con opt of risk nd refrn into their strategy management process, which is already 2 rnorm in finance. Herein lies the oppor nity to expand the balance” concept ia 4 Seay that woul further extend the weful hess of the BSC, derek management. Sother Function af BSC i that i can takes vari tty of business management frameworks br methods as if they were “components” Of the overall management strategy and Integrate them in their appropriate posi tion: This fanctionality means that each individual framework or method can be internalized with hardly any dare tots independent purpose. Scholar who research modularity call thie “total eystem func tionality” The fact that the BSC has such functionality is proven bythe fact that BSC has internaleed a variety of methods such 18 Six Sigma, EVA, and ABC. In addition to Sik Sigma, EVA and ABC, 4 flood of various business management Frameworks, methodologies, and toas such {0B CPM ERM, ERE, CRM, CSR, COSO, SO tan emerge if one examines business man fgement practices today This can have the harmful effect of creating frontline conf fon an! redicing morale, However, with its total system functionality, the BSC can falve this management problem by provi ingan overall bias eyeview that integrates the individ component methodologies For example, the BSC has the capacity 10 fully incorporate a mission, vision, stat egy and operations into one logical nte- rated toolkit, Because the complete BSC Incorporates four peespectives—strategic themes, multiple objectives, performance measures, and initiatives all areas of the brguniztion can be managedin a complete, holitie fashion, As an all-encompassing framework, the BSC makes ft porsible to itmplement strategy with appropriate con- fideration tothe positioning of individual framevtorks, methods, and tools “Among areas sill tobe integrated using the SC, risk managements priority tt higher than that of most othere because riskisan omnipresent factor that has tobe facod inall corporations. and iskandsteat- gy are mutually interdependent, That is A clearly defined strategy is critical for an Appropelae risk management function and Conversely, itis the presence af appropri- fe risk ofanagement that determines the degrees of freedom forthe strategy With the BSC's total system functionality, one an conchide that aligning strategy and Fisk management serves to prevent risk danagement from becoming an end vats itsefand enables the enterprise to ratio= tally implement risk management in ba mony with strategy Using the BSC.to evaluate strategy and tsk scenarios As of now there is no standard definition of isk But ome were taattempet define