Practical Steps to Implement Enterprise Risk Management (ERM)
“LGM/LGW … more than insurance”
Distinctive. Choice.
RRC Programme • RRCs to provide RM assistance to LGM & LGW Members • emphasis on Enterprise Risk Management (ERM) • aim is to provide guidance to assist Members to implement the framework in their timeframe • additional conduit to all existing services and resources provided to LGM & LGW Members
“LGM/LGW … more than insurance”
NORTH QLD
CENTRAL QLD
SE QLD DD & SW QLD
Gold Coast
“LGM/LGW … more than insurance”
Carpentaria Shire - Normanton
“LGM/LGW … more than insurance”
On the road to Julia Creek
“LGM/LGW … more than insurance”
Council update • Regional Risk Coordinators have been liaising with your CEOs • CEOs are committed to improving risk management practices • Many have commenced or are committed to begin the ERM process • Are you already involved? If not make sure you are • It is going to happen, your involvement is essential “LGM/LGW … more than insurance”
Why are we getting involved, I already have good risk management practices! • Every day we hear of risk management failures and problems • Everyone talks and thinks about risks and everyone fears some types of risk • Are the risk treatments we are taking working, or are we exposed to different or greater risks than we appreciate? • The reality is that every time you make a decision, you create a risk for the organisation “LGM/LGW … more than insurance”
“LGM/LGW … more than insurance”
“LGM/LGW … more than insurance”
Fencing homeowner didn’t use “Dial before you dig”
“LGM/LGW … more than insurance”
DON’T WORRY IT WILL ALL ADD UP IN THE END Accountant’s Philosophy
“LGM/LGW … more than insurance”
New Sun Safe initiative might need some more thought
“LGM/LGW … more than insurance”
WHAT IS RISK?
Risk is just the chance of something happening
Risk can be good or bad or both!
“LGM/LGW … more than insurance”
WHAT IS RISK MANAGEMENT? Risk management is managing those risks we have the power to manage. Can be as simple or as complex as we choose to make it. “Risk management” is “the culture, processes and structures that are directed towards realising opportunities whilst managing adverse effects.” Culture: • “the way we do things around here” ? • can be good or bad • staff follow lead of management • for an efficient environment that achieves its objectives, then appropriate standards need to be established and enforced, e.g. road rules • mgt needs to enforce standards and be seen to be committed to them = impact on developing right kind of culture “LGM/LGW … more than insurance”
Recognise that some Councils do already manage many risks…. “Traditional” based Risk Management
OH&S
Finance
Technical
“LGM/LGW … more than insurance”
Environment
Limitations of “Traditional” Risk Management •
Usually involved working in silos
•
Duplication or overlapping of systems
•
Organisation may use different processes, controls, language and frameworks to manage risk in isolated departments
•
Little, or no, communication between disciplines to consider the impact of their actions on other parts of the organisation
•
Tendency to be a bottom up approach
“LGM/LGW … more than insurance”
ERM requires the removal of traditional functional, divisional, departmental or cultural barriers Integrate, share information, create windows, whole of organisation approach
OH&S
Finance
Technical
“LGM/LGW … more than insurance”
Environment
ERM process • System that goes across the whole organisation • Covers Strategic, Operational, Financial, Technical, Environmental Impacts, Regulatory, Property & Assets, HR exposures, Political, Reputation, OH&S, IT, Business Continuity, Climate Change, Contractor Risks, Projects/Events etc • Practical and streamlined approach • Ensures achievement of corporate goals and objectives
Don’t wait to get asked, get involved, participate, everything revolves around $$. You are the expert in this area “LGM/LGW … more than insurance”
What process do we use? There is a formal process New Standard AS/NZS/ISO 31000:2009 Recognised as world’s best practice
“LGM/LGW … more than insurance”
How do you practise Risk Management?
HOW DO YOU PRACTISE RISK MANAGEMENT? Assess the likelihood and consequences from the hazards or risks Consequences Insignificant
Minor
Moderate
Major
Catastrophic
No Injury, 0 - low $ loss
First Aid Injury, low -medium $ loss
Medical Treatment, medium - high $ loss
Serious Injuries, major $ loss
Death, huge $ loss
H–5
H–4
E–3
E–2
E–1
M–6
H–5
H–4
E–3
E–2
L–7
M–6
H–5
E–4
E–3
L–8
L–7
M–6
H–5
E–4
L–9
L–8
M–7
H–6
H–5
Likelihood
Almost Certain is expected to occur at most times
Likely will probably occur at most times
Possible might occur at some time
Unlikely could occur at some time
Rare may occur in rare circumstances
“LGM/LGW … more than insurance”
ERM AT WORK -“A HYPOTHETICAL CASE STUDY ” THE SWIMMING COMPLEX Council was considering how to deal with its ageing 50 metre outdoor pool.
The pool and all the associated infrastructure (outbuildings, pump house, filters, etc) were over 40 years old.
Council did the right thing and consulted with the community.
“LGM/LGW … more than insurance”
THE SWIMMING COMPLEX – continued….
THE CONSULTATION STAGE
The consultants they engaged came back and advised Council that the community wanted the old pool replaced with an indoor pool. They also advised that the community thought this was a good opportunity for Council to provide much more than a pool. They also wanted a couple of multipurpose (basketball size) courts and a gymnasium.
“LGM/LGW … more than insurance”
THE SWIMMING COMPLEX - continued ….. THE CONCEPT As part of their brief the consultants had prepared a concept plan for the new indoor recreation and aquatic centre including: A 10 lane 25 metre lap pool, A kids learn-to-swim pool, A novelty pool. Two multipurpose basketball courts and a state of the art gymnasium, and On the far side of the building a hydrotherapy pool. The consultants also provided a business plan including fully costed budgets which showed the centre could be run by a contractor at a profit. “LGM/LGW … more than insurance”
THE SWIMMING COMPLEX – continued…. THE BENEFITS The reports detailed how the new facility would be so much better than the old facility for numerous reasons. The pool would be indoor and heated so could be used all year round – by the swimming club, schools and the public. Easier to look after the pool as it would be smaller and use less water and chemicals. It would include a hydrotherapy pool for rehabilitation patients. It would provide somewhere for the youth to go because there was little to do in town. They could provide aerobics classes AND childminding for mums. The improved kiosk meant parents could enjoy a decent cuppa whilst their kids were swimming. Etc, etc, “LGM/LGW … more than insurance”
THE SWIMMING COMPLEX – continued….
WHAT COUNCIL DID!
Council adopted the consultants recommendations as is. Council contracted out the design and construction of the new centre. Council contracted a consulting engineer to oversee the construction. Council tendered out the operating lease of the centre. The centre was opened to great fanfare.
“LGM/LGW … more than insurance”
THE SWIMMING COMPLEX – continued…. THE OUTCOME! Within 12 months the lessee did a midnight runner owing thousands of $ to local businesses, The “state of the art” ozone water disinfecting system didn’t work properly, One end of the pool lifted up It leaked Nobody used the gymnasium Hardly anyone wanted to swim in winter The income was dramatically below the forecasts The expenses were dramatically higher than the forecasts It couldn’t get enough qualified staff from within the community It got bad press continually for years
THE SWIMMING COMPLEX – continued… THE DEBRIEF In discussions with Council staff in the years that followed they advised: The engineers knew the ozone technology was still in its infancy, The finance staff knew the budget forecasts weren’t realistic, The HR department knew that staffing the centre would prove problematic, One of the Councillors knew the building work was sub-standard, Everyone knew that winter swimming wouldn’t attract the crowds, The press had a field day because Council kept discussing all the downfalls every month at Council meetings “LGM/LGW … more than insurance”
THE SWIMMING COMPLEX – continued… THE LESSONS! If they had applied ERM in the planning stage they would probably have foreseen most of these problems and had a chance to address them. The engineers could have foreseen the risks relating to the design, the “new technology” and the build quality; The finance staff would have foreseen the risks relating to the highly optimistic financial forecasts; HR would have highlighted the risks around the increased staff required along with the new skills they would need; Could have prevented wasted funds, and saved reputation by using a challenge process, and utilised valuable skills of in-house Council staff. “LGM/LGW … more than insurance”
Where to from here? •Go back to Council and get involved, don’t wait to be asked •Help set the cultural tone, be active and lead by example •Identify your risks and help decide on the “big picture” Corporate risks •Get all staff to be involved in process, over time it will become part of their everyday activities •Assist with the development of a process or system to demonstrate compliance •Keep it simple, advance step by step •BUT MAKE SURE YOU GET INVOLVED
“LGM/LGW … more than insurance”
Practical guides available
Part 1 – An Introduction to ERM Part 2 – Senior Management Commitment and Program Overview Part 3 – Risk Maturity Diagnostic Part 4 – Establishing a Risk Management Committee (out soon) Part 5 – Establishing the Context (out soon)
Your Regional Risk Coordinator can help you with the process 4 Regional Risk Coordinators positioned across the State • • • •
Alan Balloch – Darling Downs & South West Qld Fran Gilbert – South East Qld Shane Gray – Central Qld Ian Barton – North Qld
Thank you “LGM/LGW … more than insurance”
