The decision-maker always suffers from insufficient information, but with the intensification of competition, the gap has grown between what a set of unilateral measures can provide in terms of information and indicators due to their shortcomings and lack of comprehensiveness. Therefore, efforts have increased to find those tools capable of translating strategies into a set of actions. In an attempt to achieve what is known as directing performance, which requires following up and monitoring actual performance levels and surrounding conditions, whether internal or external, to provide renewable information capable of redirecting performance to the right directions, in pursuit of being able to control performance and its conditions.
The Balanced Score Card is a management system through which the strategic goals of the organization are reformulated into a set of measurable goals. So that it is evaluated, measured, monitored and modified to ensure the achievement of the strategic objectives of the organization. The balanced scorecard system aims to provide a comprehensive vision for decision-makers by completing financial measures and developing additional measures that measure performance and skills in areas such as customer satisfaction, innovation of new products, and so on. Whereas, executives are aware that the measurement system in their organizations strongly affects the behavior of managers and employees, as well as traditional mathematical measures such as return on investment and return on shares, and does not give good results for continuous improvement and innovation in line with the activities required by the competitive environment, as it is not in line with the skills and competencies that are needed. Organizations are trying to master it
Management’s concern is no longer focused only on its internal conditions. With the growth of competition and the acceleration of high-tech developments, the management’s need for strategic mechanisms that help decipher the business environment has increased. Indeed, the nineties of the last century witnessed the emergence of balanced scorecards, in an attempt to provide a more comprehensive view to give A framework for strategic measurement based on a statement of the relationship between cause and effect in an attempt to tighten control over the roots of daily operations. The periodic control – annual or quarterly – is no longer feasible with the increasing linkage of risks to all aspects of the operations environment. Those risks that have become irreversible, and therefore It has become necessary to deal with it.
Despite the rapid spread of the Balanced Scorecards, which was a major reason for the card’s developments, the practical reality and the rapid and successive developments witnessed in the business environment proved the inability of the Balanced Scorecards to achieve the desired balance.
In an attempt to shed more light on the imbalance of balanced scorecards, we discuss the following set of topics:
The growing need for business risk management.
Risk can be defined as deviation from what is targeted, and with the growing development and complexity of business and commercial relations, the inability of traditional methods to shape the nature and limits of risks that business enterprises may be exposed to, and this has increased the rates of serious pursuit towards finding those mechanisms capable of defining, measuring and managing risk. Everyone has realized that the decision-making process must take place in two main axes, one of which is the axis of increasing the return, while the other is mitigating risks and making them not go beyond those levels that can be accepted.
The successive financial failures in the international business environment have contributed to changing many features of risk management methods and methods, which can be described as a comprehensive system of methods and techniques directed to the process of creating the appropriate environment for dealing with risks towards estimating their effects after identifying them and monitoring the appropriate means and arrangements to eradicate their thorn or To mitigate its severity on the financial position of the business and its solidity. Financial risk management deals with the relationship between the required return on investment and the risks that accompany this investment, with the intention of employing this relationship in a way that leads to maximizing the value of that investment from the point of view of its owners. Hamilton () explained that risk management includes the following set of activities:
Collecting information about the company’s dangerous assets.
Determine the expected threats for each asset.
Determine the areas in the system that allow the threat to affect the asset.
Determine the losses that the facility may be exposed to if the expected threat occurs.
Identify alternative methods and tools that can be relied upon to reduce or avoid potential losses.
Determining the methods and tools that the establishment has decided to rely on in managing potential risks.
It should be noted that the risks facing the institution can be classified according to the source of the risk, or according to the link of the risk to the institution, or on the basis of the informational competitive advantage. The main financial risk management strategies can be identified in each of the strategy of leaving the position open, the strategy of taking calculated risks, and the strategy of coverage. All risk, and in general, the effective practice of financial risk management in business establishments requires the following ():-
A study of the extent to which the business environment accommodates the levels of financial risk management in business enterprises when determining the market values of these institutions.
Examining the individual relationship between the institution’s financial risk management tools and value creation indicators, in order to discover investors’ preferences and opinions towards these tools.
The objectives of risk management can be summed up in giving the board of directors and executive managers a complete idea of each of the risks faced by the institution and setting up a system of internal control in order to prevent potential losses, and to ensure that the appropriate return is achieved for the decisions taken. Risk management is a competitive weapon.
The oversight role is no longer limited to controlling current risks, but extends to developing effective means and systems to confront risks in a way that ensures that activities are carried out in an appropriate manner.
Creating a framework for periodic evaluation to identify the suitability of the existing regulatory standards for developments and developments, and this in turn necessitates full cooperation and coordination between the supervisory and administrative roles for risk management operations through the continuous support of the supervisory body for the administrative process and its decisions, in a way that avoids exposure to any kind of risk.
According to classical economic theory, the world is a group of individuals, each of whom seeks to maximize his own benefits in light of a set of restrictions that govern it, and therefore investors can diversify between different business fields to achieve appropriate and acceptable levels of the elements of return and risk, and with the policies of liberalization and the intensification of competition, it is on the taker The decision is to recognize that there is no decision without risk, and therefore it is necessary to take all measures that contribute to reducing undesirable results, and this has contributed a lot to the growth of jurisprudence in support of activating internal control systems as one of the most important axes for protecting the resources of business enterprises due to their capabilities that allow It has access to the roots of all business processes.