The Importance of Linking the Budget and Risk Management to Organisation Strategy
Date: July 04, 2022
It is quite common to find that organisations don’t fully integrate or risk assess their budget and corporate strategy. The alignment of the budget through operational and project plans to the strategic plan, supported by key metrics, provides the organisation with clarity on its performance, resilience and sustainability. Identification and management of critical risks should underpin planning performance and budget management. So, how can a business ensure these important aspects are built into their planning, budgeting and risk frameworks and processes? Keep reading to find out!
It is quite common to find that organisations don’t fully integrate or risk assess their budget and corporate strategy. The alignment of the budget through operational and project plans to the strategic plan, supported by key metrics, provides the organisation with clarity on its performance, resilience and sustainability. Identification and management of critical risks should underpin planning performance and budget management. So, how can a business ensure these important aspects are built in to their planning, budgeting and risk frameworks and processes? Keep reading to find out!
A key reason budgets, corporate strategy and risk management are not well aligned is that key stakeholders from each of these areas in the organisation are not always involved in their development. Nor do the processes they work with always identify where and how they should link up.
Often, strategic plans will be developed in relative isolation by Executive Teams in consultation with their Boards. If a strategic risk identification and assessment is carried out it may be out of sync with the development of the strategic plan. As well, the finance team may not be part of either of these processes.
Too often there are also points of disconnection between the strategic and operational or business plans. This is particularly apparent in organisations with segmented business structures and/or multi-layered organisational structures.
Under these circumstances, getting a direct line of sight between operational delivery and achievement of corporate goals can be very difficult if not impossible. Which means the accuracy of budget modelling, financial forecasting and determination of corporate performance, resilience and sustainability can be seriously compromised.
The COVID-19 pandemic brought all of this into sharp focus, when strategic priorities had to be rapidly re-assessed, strategic business risks and performance of controls needed to be reviewed and addressed, budgets and financial forecasts revisited, and important resourcing decisions needed to be made quickly. This high velocity and high impact risk really exposed the lack of integration between planning, budgeting and risk management many organisations have been operating with. In this sense it really has acted as a call to action.
How do we link all of this up? The answers for this really do lie in the root causes of the problem.
The policies, frameworks and processes governing integrated planning, budgeting and risk management need to be reviewed and the points of connection identified, roles and responsibilities made clear.
This also needs to be reflected in the organisation’s planning and budgeting calendar and be supported by targeted communications to all stakeholders involved.
Importantly, operational planning and budgeting should have a clear linkage to the strategic plan, with risk identification, assessment and active management occurring at all levels.
As well, monitoring and reporting of performance, including key metrics and scorecards need to be identified at each level from operations through Executive to the Board. This ensures accountability, transparency and more informed decision making. It also supports future rapid response and recovery to major disruption risk initiators like a pandemic, a cyber attack, an earthquake or whatever else is on an organisation’s strategic risk radar.
Watch this video by Matthew Grove, CEO of GK Horizons, sharing insights from a recent study done by PwC identifying surveyed CFO Priorities that focus on performance management, risk management, process optimisation and growth strategies.
Camms point of difference in the global marketplace is the integration of planning, budgets and risk management in a platform that provides dashboard and report monitoring and detailed insights into performance.
Camms.Strategy enables organisations to develop and link operational/business plans and strategic plans with a direct line of sight from deliverable actions to strategic goals. An integration from a source financial system to Camms.Strategy via APIs can link budget and actuals to the planning and organisation structures and provide up to date status reporting.
Performance measurement through Camms.Strategy ensures financial and non-financial indicators and scorecards can track the efficiency and effectiveness of the organisation in achieving its outcomes over the short, medium and long terms.
Camms Portfolio and Project Management solution can track all corporate and major projects across the business and like Camms.Strategy can be integrated with the organisation’s financial system. The solution can capture project concepts and budget bids, run them through a prioritisation and selection process and inform an organisation’s capital investment planning activities.
Camms.Risk enables the organisation to assess and review strategic, enterprise, operational and project risks, as well as capture, track and report on risk treatment actions and control effectiveness. Risk is part of the Camms GRC suite of products which also includes Audit, Compliance and Incident Management.
Camms.Project and Camms.Risk have native integration with Camms.Strategy so progress reporting can flow through to corporate reports and dashboards aligned to corporate goals.
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