Using risk management to survive and thrive

Using risk management to survive and thrive

Paul EmeryHead of Community and Social Organisations Zurich

Tilden Watson, Zurich Risk Engineering

ACEVO ConferenceNovember 2011

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Through the risk management maze

Risk Expertise– Take full advantage of future

opportunities– Confidence for commissioners supply

chain– Enables innovation– Those that most effectively embrace

manage risk (and have the capacity and resilience to take on more risk) will be the most successful

Guide to help demystify risk management.

We believe in keeping risk management practical and proportionate.

This session will seek to explore some of the current risk challenges.

The resilience of others

Living with risk?

Surviving and thriving

Threats to our resilience

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What is Resilience?

Business resilience: Having processes in place for planning, organising and controlling the activities of the organisation in order to minimise the effects of risk.

Resilience:Ability to resist shocks

………or, to……..

‘Bounce back’ quickly when the unexpected happens

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Building a resilient organisation


Managing risks

Opportunity selection

Setting an appetite

Understanding and

managing the supply chain

Robust crisis management

approach

Business Continuity Planning

(BCP)

Corporate planning

Being prepared

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Quick exercise

• Group 1 – Charity sector risk view over the next two years (use template No 2)

• Group 2 - Charity sector risk view over the next ten years (use template No 2)

• Group 3 - (the positive group) opportunities over the next two years (use template No 3)

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How do the results compare?Tough choices – Medium term view

1. Loss of funding / financial instability

2. Continuity and crisis response

3. Damage to reputation and brand equity

4. Comprise to charitable aims and purpose

5. Commissioning environment6. Execution of organisational

change7. Short term decisions8. Workforce planning and

capacity9. Governance failure and data

loss10. Gaps in the CSO network11. Partner and supply chain

failure

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How do the results compareGlobal risks sixth edition Longer term view(produced in collaboration with Zurich)

TOP TEN1) Climate change 6) Energy price

volatility2) Fiscal crises 7) Geopolitical

conflict3) Economic disparity 8) Corruption4) Global governance failures 9) Flooding5) Extreme weather events 10) Water security

Interactive website: http://www.weforum.org/globalrisks2011

ONES TO WATCH

Cyber security [online data /information security]Demographic challenges [age structure/ population growth]Resource security – commodities / energy challenges (volatility)Retrenchment for globalisation [protectionism]WMD [terrorists / geopolitical conflict]

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Esc

ala

te if

requir

ed

Managem

ent

co-o

rdin

ati

on

Becoming resilient a few thoughts

Risk Matrix

Very

Hig

h

B

Hig

h C 4a, 8, 13

Sign

ifica

nt

D 2

Low 5

1, 3, 6, 4b, 11

Very

Low E 9, 12 10 7

Alm

ost

Impo

ssib

le

F

1 2 3 4Neglible Marginal Critical Catastrophic

Impact

PRO

BA

BIL

ITY

Risk Matrix

Very

Hig

h

B

Hig

h C 4a, 8, 13

Sign

ifica

nt

D 2

Low 51, 3, 6, 4b,

11

Very

Low E 9, 12 10 7

Alm

ost

Impo

ssib

le

F


Impact

PRO

BA

BIL

ITY

Risk Matrix

Very

Hig

h

B

Hig

h C 4a, 8, 13

Sign

ifica

nt

D 2

Low 5

1, 3, 6, 4b, 11

Very

Low E 9, 12 10 7

Alm

ost

Impo

ssib

le

F


Impact

PRO

BA

BIL

ITY

Risk Matrix

Very

Hig

h

B

Hig

h C 4a, 8, 13

Sign

ifica

nt

D 2

Low 5

1, 3, 6, 4b, 11

Very

Low E 9, 12 10 7

Alm

ost

Impo

ssib

le

F


Impact

PRO

BA

BIL

ITY

Risk Matrix

Very

Hig

h

B

Hig

h C 4a, 8, 13

Sign

ifica

nt

D 2

Low 5

1, 3, 6, 4b, 11

Very

Low E 9, 12 10 7

Alm

ost

Impo

ssib

le

F


ImpactPR

OB

AB

ILIT

Y

1. Using both risk and opportunity to inform your plans

2. Less is more - not quantity of paperwork [key messages and robust conversations] Remove jargon.

3. Up-skill Board Members to use / challenge risk information

4. Not just short term. Think longer term as well.

5. Nobody reads risk strategies. Define yours on one page?

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Tangible benefits

Credit ratings (S&P)

Reduce “Total Cost of Risk” incl. insurance

Less interruptions / resilience

Inspection regimes satisfied (compliance)

Industry groups

Achieve objectives

Risk management benefits(aka why bother?)

Intangible benefitsConsensus at the Board levelImproved communication (down and up)Increased (internal) confidence in mitigationExternal confidenceFocus and prioritisation

now….as I was saying about risk

management


Living with risk?



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1 in 5 year event……It will happen to you or your partners

Capacity

issues

(e.g. flu etc)Power

cuts Flood

System failu

re

Partner

failure Accidents

fuel

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Supply chain understanding is a must

* Derived from Cranfield University – Supply Chain Risk study

LEVEL 2 Infrastructure

LEVEL 3Organisation networks

LEVEL 1Process

LEVEL 4External environment

LEVEL 0People

Physical flow (logistics)

Strategic (partnerships)

Value creation (production)

Examples

Employees

Regulatory,Exchange rates,Country, region issues

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Quick exercise

1. Who do we fundamentally rely upon?

2. What examples of mitigation do we have in place?

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Be prepared

1. Understand and manage your supply chain – they fail – you fail

2. Robust method for managing a crisis (how, decision making, recording, communicating)

3. Understand your key priorities within your organisation (what must you keep going versus areas you can stop)


Living with risk?



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Fundamental - defining what risks to live with?

Requirements for effective delivery

Board buy-in / sign-off vital

Set clear boundaries for escalation / reporting

Set clear expectations down through an organisation

Define risks that threaten objectives

Define metrics e.g. performance, financial, reputational

“The biggest risk you can take is not to take any risks” J.Guardiola {May 2011}

“The amount of risk that an organisation is willing to pursue or retain” [ISO 31000]

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Quick “academic” exercise

?

Very high>90%

High31 - 90%

Significant5% - 30%

Low< 5%

Very Low< 1%

Almost impossible

<0.1% Neg

ligib

le

Marg

inal

Critic

al

Cata

stro

ph

ic

You are going away as a group for a weekend in the Lakes …. Plot your groups appetite for risk (shade the squares where

you are prepared to take a risk)

Catastrophic = DeathCritical = Loss of limb

Marginal = broken bone (it will heal)

Negligible = Scratches

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Key messages regarding resilience….

Embed at the top table!

Don’t just think short term

Risk appetite can bring focus and set cultural tone

Understand your supply chain

Tilden Watson CPFA, IIA, MBCI

Team Leader, Strategic Practice

Zurich Risk Engineering UK

Mobile: +44 (0)7730 735 409

e-mail [email protected]

Documents

Using risk management to survive and thrive