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.
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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
Surviving and thriving
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
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 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 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 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
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
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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)
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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]