Integration of risk management and performance measurement
Since the beginning of the 90s both enterprise risk management and balanced scorecard have emerged as management control systems (MSC). Even though both systems are aiming for goal achievement the two MSCs have emerged as two separate systems.
The purpose of our thesis was to see how the integration of a system of risk management and a system of performance measurement can affect the diagnostic and interactive use of management systems and to explain this we used a case study of a medium sized Norwegian organization.
We found that the integration of risk management and performance measurement takes place along both the technical, the organizational and the cognitive dimension. The integration happens over time, with the different dimensions integrated at different points, while the dimensions support the integration of each other. We also found that the system for risk management and the system for performance measurement are used interactive and diagnostic both before and after the integration, but that the system for performance measurement is better suited and more used as diagnostic management control. The cognitive and organizational integration makes the balanced scorecard better suited for interactive management control, while the technical integration gives a more diagnostic use of the balanced scorecard.
We contribute to the literature with a study of how two systems are integrated and how the use of management control systems is affected by the integration. In addition, the study contributes to practitioners who wants to integrate two management control systems by showing that an integration should be done over time and that cognitive and organizational integration can facilitate technical integration.
action: Karoline Thu Valderhaug and Henrik Løland Hareide