A Practical Approach for Risk-Adjusting Performance

Measuring Business Excellence, Vol. 12, No. 4, pp. 4-12, 2008

Posted: 9 Nov 2008

See all articles by Joseph Calandro, Jr.

Joseph Calandro, Jr.

Fordham University - Gabelli Center for Global Security Analysis

Scott Lane

Quinnipiac University; Quinnipiac University

Ranganna Dasari

Adaptik Corporation

Date Written: November 8, 2008

Abstract

Purpose: Risk management has grown increasingly popular in recent years due to the recognition that risk should be as actively managed as performance. A key objective of risk management is to evaluate performance in the context of the relative volatility in which business operations are undertaken. However, accomplishing this has generally proven difficult. In this paper, we present a practical approach for risk-adjusting performance.

Design/methodology/approach: This paper presents a practical risk-adjustment methodology that is based on a popular statistical measure. The utility of the approach is demonstrated in two practical examples: the first is an industry-based example and the second is an M&A example.

Findings: The results of our research suggest that the risk-adjustment approach presented here could become an important part of both performance management and risk management programs.

Practical and research implications: Our approach facilitates the practical risk-adjustment of select performance measures and risk measures. As this is an introductory paper, further research could be conducted on the specifics of the risk-adjustment process as well as the strategic context in which measures are risk-adjusted.

Originality/value: This paper introduces a practical approach of risk-adjusting performance that was inspired by a popular statistical measure, which is demonstrated in two practical examples.

Keywords: Risk management, Business performance, Statistical methods

JEL Classification: D81, G22, M21

Suggested Citation

Calandro, Jr., Joseph and Lane, Scott and Dasari, Ranganna, A Practical Approach for Risk-Adjusting Performance (November 8, 2008). Measuring Business Excellence, Vol. 12, No. 4, pp. 4-12, 2008. Available at SSRN: https://ssrn.com/abstract=1298128

Joseph Calandro, Jr. (Contact Author)

Fordham University - Gabelli Center for Global Security Analysis ( email )

531 Hughes Hall
441 E. Fordham Rd
Bronx, NY 10458
United States

HOME PAGE: http://www.linkedin.com/in/josephcalandro/

Scott Lane

Quinnipiac University ( email )

Mount Carmel Ave
Hamden, CT
United States
(203) 582-8367 (Phone)

Quinnipiac University ( email )

United States
2035828367 (Phone)
2035828367 (Fax)

Ranganna Dasari

Adaptik Corporation ( email )

1495 Valley Center Parkway
Suite 120
Bethlehem, PA 18015
United States
(610) 814-4845 (Phone)

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