Development of Risk-Adjusted Metrics
Development and implementation of risk-adjusted metrics for your corporate objective system
- Analysis of relevant risks and metrics
- Development of tailored risk models
- Integration into reporting and dashboards
Embed risk metrics into Balanced Scorecard and performance management systems
Risk-Adjusted Corporate Steering: KPI & BSC Integration
Integrate enterprise risk management into KPI systems, Balanced Scorecards and incentive structures.
- 01Risk-adjusted KPIs like RORAC and RAROC integrated into existing management systems
- 02Balanced Scorecard extended with risk perspective for holistic decision-making
- 03Value-oriented governance with measurable risk-performance targets
11+Years of experience
120+Employees
540+Projects
ISO 27001certified
How to Integrate Risk Management into Balanced Scorecard and KPI Systems
Integrating enterprise risk management into existing management instruments such as Balanced Scorecards, KPI dashboards and incentive systems transforms risk management from an isolated compliance function into a strategic steering tool. Risk-adjusted metrics like RORAC (Return on Risk Adjusted Capital) or RAROC enable informed decisions that consider both return and risk. We help you implement this integration in your individual management processes.
Our consulting services include analysis of your existing management instruments, development of tailored risk-adjusted metrics and their integration into Balanced Scorecard, performance management systems and compensation models. We combine proven frameworks like COSO ERM and ISO 31000 with practice-tested risk-adjusted performance measurement methods. The result: Value-oriented corporate steering that not only measures risks but actively incorporates them into decision-making.
3 service modules
What we take on for you
Bookable individually or as an end-to-end programme.
Integration into Balanced Scorecard
Integration of risk management into your Balanced Scorecard and performance management systems
- Development of a Risk-Balanced Scorecard
- Integration of KRIs into existing perspectives
- Risk-oriented strategy maps
Risk-Oriented Incentive Systems
Development and implementation of risk-oriented incentive systems and compensation models
- Risk-adjusted performance measurement
- Integration of risk objectives into target agreements
- Long-term oriented compensation models
3 phases
Our Approach
We support you with a structured approach to integrating risk management into your corporate objective system.
Analysis of the existing objective system and risk management processes
Development of an integrated concept for risk-oriented corporate management
Implementation, training, and continuous improvement
Your contact
Melanie Düring
Head of Risk Management
Integrating risk management into the corporate objective system is the key to sustainable and value-oriented corporate management.
Our Strengths
- 01Deep expertise in risk-adjusted performance measurement (RORAC, RAROC, Economic Capital)
- 02Practical experience extending Balanced Scorecards with risk perspectives in banks and insurers
- 03Holistic approach: from metric development to anchoring in compensation systems
- 04Interdisciplinary team of controlling, risk management and strategy experts
Expert Tip
Risk-adjusted KPIs like RORAC or Risk-Adjusted EBITDA are only effective when they consistently feed into target agreements and incentive systems. Without this anchoring, risk management remains a pure reporting instrument without steering impact.
7 QUESTIONS, BRIEFLY ANSWERED
Frequently asked questions about Integration into the Corporate Objective System
What does integrating risk management into the corporate objective system mean?
Integration systematically links risk management with corporate steering so that risks are considered in every strategic and operational decision. In practice this means: risk-adjusted targets instead of pure performance goals, KRIs alongside KPIs in the balanced scorecard, risk appetite as a guardrail for strategic planning, and risk-related components in incentive systems. The COSO ERM Framework and ISO 31000 explicitly require this integration.
How do you develop risk-adjusted metrics for corporate steering?
Risk-adjusted metrics combine performance and risk measurement. RORAC (Return on Risk-Adjusted Capital) relates earnings to deployed risk capital. RAROC adjusts earnings for expected losses. EVA-based approaches include capital costs with risk premiums. Each metric requires defined thresholds and escalation mechanisms. The metrics feed into the balanced scorecard and are linked to individual target agreements.
How do you integrate risk management into the balanced scorecard?
Integration occurs through an additional risk perspective or by supplementing existing perspectives with risk metrics. The financial perspective adds RORAC and VaR limits to return targets. The customer perspective incorporates concentration risks and credit default rates. The process perspective measures operational risk indicators and control effectiveness. The learning and growth perspective captures risk culture indicators and training completion rates.
What is the difference between KPIs and KRIs in risk management?
Key Performance Indicators (KPIs) measure historical performance and goal achievement, looking backward. Key Risk Indicators (KRIs) are forward-looking early warning indicators that signal potential risks before they materialize. Example: The KPI credit default rate measures realized losses, while the KRI overdraft quota warns of rising defaults. Effective integration links both: when a KRI breaches its threshold, the associated KPI forecast is adjusted.
How do you link risk management with incentive systems and compensation?
The linkage occurs through risk-adjusted compensation components. Variable compensation is tied to risk-adjusted results like RORAC rather than pure revenue targets. Deferral periods account for long-term risk effects. Malus and clawback provisions enable recoupment when risks materialize after payout. MaRisk institutional remuneration requirements (InstVV) explicitly demand consideration of risks in variable compensation.
How do you incorporate ESG risks into the corporate objective system?
ESG risks are integrated as a standalone risk category or as drivers of existing risk types within the objective system. This includes ESG KRIs such as portfolio carbon intensity, social risk scores for suppliers, and governance compliance indicators. ESG targets in the balanced scorecard with clear metrics and time horizons. Linking ESG performance with variable compensation. BaFin sustainability risk guidelines require integration into business and risk strategy.
What does ERM integration into the corporate objective system cost?
Costs depend on the complexity of existing steering systems. Typical projects include design of risk-adjusted metrics (eight to twelve weeks), integration into BSC and reporting (four to eight weeks), and linkage with incentive systems (four to six weeks). ADVISORI supports the entire process from maturity assessment of existing ERM through design of the integrated steering model to implementation in IT systems and reporting structures.
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