risk & collections risk management & collection care
TRANSCRIPT
RISK & COLLECTIONS
Risk Management& Collection Care
Definitions From AS/NZS ISO 31000:2009
Risk management - Principles and guidelines: Risk -the effect of uncertainty on
objectives
Risk Management - coordinated
activities to direct and control an
organisation with regard to risk
Definitions
Jonathan Ashley-Smith:
Interview by Bas van Velsen available on http://www.scribd.com/
Risk Management
Provides systematic & consistent approach
tools to identify potential hazards & prevent loss & contain costs
means to reduce uncertainty
aid to strategic planning and operational management
dynamic and flexible system that can be tailored
Collection Care Range of activities undertaken to protect
collections in use, on display and in
storage, including:
storage planning
preventive programmes
conservation treatments
environmental monitoring
documentation
Risk Management – a little bit of background
Origins in 1950s - US insurance industry
1960 & 1970s – use in OH&S
1970s - awareness that many risks facing
organisations were not insurable
1980s – application to project
management increasing, continuing
application to market & credit risk
1990s – emphasis on enterprise risk
management (ERM)
Risk Management – a little bit of background
2000s increased awareness of RM - AS/NZ Standard
contributed to this
2008, GFC – “failure to correctly apply risk management processes and procedures”
In relation to collections beginnings in 1980s
1990s - Michalski , Waller & Ashley Smith developing RM for collections or individual objects
Risk Management – a little bit of background
Insurance
Construction
Project
Management
Finance
Environmental
management
Nuclear industries
Management
Medicine
Manufacturing
Legal
IT
Who uses RM?
......and many others
The Standard
AS/NZS ISO 31000:2009Risk management – Principles and guidelines
http://www.standards.co.nz
NZ$105.30 ex GST for pdf
Figure 1 from the Introduction to AS/NZS ISO 31000:2009 Risk management - Principles and guidelines.
Reproduced with permission from SAI Global under licence 1103‐c071.
USING THE STANDARD
Risk Management Process
(Adapted from AS/NZS ISO 31000:2009)
Communicate and Consult
Importance cannot be emphasised enough
Ongoing communication should promote:
shared understanding of the process and the actions
shared language relating to risk
ownership and accountability
timely and open reporting
broader understanding across the organisation
Communicate and Consult
plans for communication need to be developed early
communication should be seen as integral to each step
vital to have understanding of stakeholders’ interests, values, perceptions, assumptions and concerns
communication plans to include identification of people with relevant expertise
Establishing the Context
stakeholder analysis
external influences analysis
internal influences analysis
context of RM process
risk criteria
terms of reference against which the significance of risk is to be evaluated
Context of RM process
Defining
goals and objectives
responsibilities for and within RM
scope – specific inclusions and exclusions
project, activity, product. service etc and relationships between them
risk management methodologies
attention to these RM that is appropriate to circumstances
Risk Criteria
Consider
nature and types of causes and consequences
how likelihood will be defined
timeframes of likelihood & consequences
how level of risk is determined
whether combinations of risks are taken into account
Risk Criteria
level at which risk becomes tolerable
way the effectiveness of risk controls to be evaluate
organisation’s risk appetite
organisation’s risk capacity
(organisation’s risk capacity in relation to its risk exposure should be monitored on ongoing basis)
Benefits of Establishing the Context
At the end of this stage you have, at least
agreed set of risk criteria re amount and type
of risk that is desirable or can be tolerated
guide to assessing the effectiveness of
controls on an ongoing basis
risk matrix that aids analysis and evaluation
guidelines on priority setting
agreed common risk language
Risk ClassificationsNMA risk classifications injury
financial loss/fraud
collection
reputation
work capability
some collecting organisations do not specifically identify collections in risk classifications
those collecting organisations that do, have a specific risk classification for collections recognise that collections:
are at the core of their operating
embody values that are not easily defined by financial models
NMA’s Risk Management Policy can be found at: http://www.nma.gov.au/about_us/ips/policies(Please note, the policy does not include these classifications; they are in a separate procedures document)
For another example of risk classifications see http://nga.gov.au/Aboutus/RMP.cfm
Example of Consequences Definitions
DESCRIPTOR EXAMPLES
Severe fatality / loss of over $100,000 / complete loss of 50% of collection / intense negative media campaign/ loss of building
Majormultiple serious injuries / loss up to $100,000 / loss of loan item or key collection item / CEO called on to explain to Board / museum forced to close for a week
Significant
serious injury / loss up to $50,000 / repairable damage to collection and/or loan items requiring complex or lengthy treatment / multiple complaints / staff unable to access computer network for 3 days
Minor
minor injury requiring first aid / loss up to $20,000 / damage to collection items necessitating some treatment / a complaint / staff unable to access computer network for ½ day
Example of Likelihood Definitions
Descriptor% Probability (of risk being
realised)Detailed Description
Almost Certain
76 – 100%
Risk has an extremely high likelihood of occurring
Is known to nearly always occur in similar circumstances and is expected to occur in this situation
Likely 51 – 75%
Risk has a high likelihood of occurring
Data indicate that this has occurred every 12-24 months
Possible 26 – 50%
Risk has a moderate likelihood of occurring
Data indicate that this has occurred in no more than once in 3-4 years.
Unlikely 0 – 25%
Risk is considered unlikely to occur
Has only been known to, or would only occur in exceptional circumstances
Example of Risk Matrix
Example of Effectiveness Evaluation Criteria
Fully effective
Controls well designed, reliable and address root cause
Substantially effective
Some concerns about effectiveness and reliability of some controls
Partially effective
Some controls not well designed and do not address root cause and/or controls are not effective.
Largely ineffective
Significant gaps. Controls do not address root cause.
Totally ineffective Controls not reliable. Controls not effective
Example of Risk Treatment Priority Ratings
Risk Rating Priority
Responsibility for Accepting Risk
Extreme Rectify immediatelyonly CEO can accept risk if it cannot be reduced
High Rectify immediatelyonly senior managers can accept risk if it cannot be reduced
MediumRectify within 1 month
business unit managers can accept risk if it cannot be reduced
LowRectify within 3-6 months
business unit managers can accept risk if it cannot be reduced
Very LowRectify within 6-12 months
risk can be accepted by supervisor / manager
Risk Assessment
Risk Identification
Risk Analysis
Risk Evaluation
Of these risk identification probably gets the least attention – but it is crucial
Risk Identification
Aim to develop a comprehensive list
of risks with details about
source of risk or uncertainty
whether impact positive or negative risk
areas of impact
cause/s
Risk Identification With details about
controls that are already in place
what might cause the existing controls to fail or be ineffective
who in the organisation should “own” the risk i.e. take ultimate responsibility for its management. (often not the person who directly treats the risk.)
NB: a risk that is not identified will not be treated
Risk Identification Methodologies
Identifying Risks
At the end of this process the organisation should
know
all the risks that might impact on the organisation achieving its purpose/objectives
whether those risks can be controlled or influenced by the organisation
possible sources and causes of the risks and how they could eventuate
individuals in the organisation responsible for the risks - risk owners
Threats to Collections
Work done at CCI by Stefan Michalski’s (9
agents) and Robert Waller (added the 10th)
The Ten Agents of Deterioration
http://www.cci-icc.gc.ca/crc/articles/mcpm/index-eng.aspx
Threats to Collections
Physical Forces
EarthquakeMishandlingPoor support
Fire
WaterFloodRoof LeaksRising Damp
Threats to Collections
Pests Infestation
PollutantsFrom nearby disasterCorrosive cleaner usedWooden storage materials
Light & radiation
Exposure to light
Criminals
Major theftIsolated vandalismEmbezzlement by staff or researchers
Threats to Collections
Incorrect temperature
Thermal shock
Higher than ideal
Incorrect relative humidity
HVAC malfunction/shutdownHigher or lower than ideal
DissociationLoss of collectionLoss of collection dataLack of legal title
Risk Analysis
relates back to the risk criteria
further develops the understanding of the risks
looks at possible consequences
looks at the likelihood of the risks eventuating
takes account of controls that are already in place
and their effectiveness
identifies the potential exposure – the impact of
the risk if there were no controls in place
interdependence of different risks and their
sources
Risk Analysis At this stage, important to consider, and
document reliability of data on which analysis based
amount of information available
divergence of expert opinions
limitations in predictive modelling
tangible and intangible impacts
ongoing relevance of information
breadth of involvement in process – different viewpoints
Risk Analysis
Depending on the circumstances risk analysis can be
qualitative
quantitative
semi-quantitative
combination
Risk Analysis
At the end of this process you should know nature of risks and how the consequences can
affect the organisation
current level of risk, taking into account current controls
how effective the existing controls are
which key controls the organisation relies on
potential exposure if controls ineffective
Risk Analysis
likelihood
conse
quence
s
low likelihoodlow impact
high likelihoodlow impact
high likelihoodhigh impact
low likelihoodhigh impact
Risk Evaluation
Risk evaluation involves
comparing the results of the risk analysis with the
risk criteria to see if the risk and/or its magnitude
it are acceptable
decisions about prioritisation of risks for treatment
identification of who is responsible for treating the
risk and monitoring controls
establishing frequency of monitoring and review for
individual risks
Risk Treatment
Risk treatment or mitigation is the modification of the risk by the application of some
form of control
often involves altering the likelihood of the
consequence and/or the nature or degree of the
consequence
risk treatment plan can aid in prioritisation and
identification of interdependencies
There are advantages in assessing risk
treatments using a cost-benefit analysis model
likelihood
conse
quence
s
low likelihoodlow impact
high likelihoodlow impact
high likelihoodhigh impact
low likelihoodhigh impact
Risk Treatment
Risk Treatments
Avoid the risk
Change the likelihood
Change the consequences
Share the risk
Retain the risk
Likelihood
Conse
quence
sRiskResidual risk 1
unacceptable
Residual risk 2 unacceptable
Residual risk 3 unacceptable
Residual risk 4 retained
Example
Likelihood
Conse
quence
s
Risk
Risk treatment 1 creates another risk
Residual risk
Residual risk acceptable based on cost/benefit analysis
Likelihood
Conse
quence
s
1.Risk of further physical damage
Physical Risk Addressed
2. Proposed treatment Introduces risk to significance
3. Opportunity
Treating risks
Treatment phase also includes an
assessment of the residual risk after the
treatment has been applied
if the residual risk is still unacceptable, further
risk treatment is likely
risk treatments can give rise to new risks or
impact on other areas of the organisation
these risks in turn need to be assessed and
evaluated
Documentation Documentation of the risk management
process is important and contributes to the
ongoing effectiveness of the process by
recording
what decisions have been made
the context in which they have been made
what has worked and what has not
Documentation provides an auditable
record
Risk Register Risk register is one component of the
documentation that is widely used
risk register is a means of recording
information on risks
their ratings and priority for treatment
current controls and any new controls
risk owner
person/s responsibility for implementing the controls
effect the controls have on the likelihood and
consequences
Risk Register
is a living document
will change with the monitoring and review
process
Important that various iterations of the
risk register are retained
it is a valuable resource for lessons learnt,
audit, assurance and to aid in training
Risk Register
no set formula for creating the register
based on the organisation’s or project’s needs
many places have separate register for business
units with highest rated risks being logged on a
corporate register
this reflects levels of responsibility for dealing with
risk
sample registers: http://
www.brighthub.com/office/project-management/articles/3247.aspx
http://en.wikipedia.org/wiki/Risk_register
Successful Risk Management
level of effort put into risk management should be
proportionate to the level of risk faced
it should be aligned with other activities within the
organisation
it should be comprehensive, covering all activities of the
organisation and all risks it faces
it should be embedded within the organisation, with wide
understanding and acceptance – a risk aware organisation
it needs respond to changes in the business or operating
environment – it should be dynamic and flexible
RM Maturity naïve - unaware of the need or do not recognise the
value of structured approaches
novice - aware of potential benefits, have not
implemented risk processes effectively and are not
gaining the full benefits
normalised - have built management of risk into routine
business processes and implement RM throughout the
organisation
natural - have a risk-aware culture with a pro-active
approach to RM in all activities consideration of risk is
inherent to routine processes
Risk Aware Culture
Achieved by strong leadership within the organisation in
relation to strategy, projects and operations
involvement of all stakeholders in all stages of RM
process
emphasis on training in RM procedures and
learning from events
absence of blame culture, but with appropriate
accountability for actions
communication and openness on all RM issues and
lessons learnt
Benefits
Risk Management has the potential to:
provide structured information that assists in
decision-making
provide assurance that your objectives will be
achieved within a level of risk acceptable to
you
ensure compliance with relevant laws and
regulations, e.g. OH&S
Benefits Risk Management has the potential to:
enhance efficiency of operations, e.g.
preventive or interventive treatments are
proportional to the level of risk, and that the
actions taken are effective in bringing the risk
into acceptable levels
validate that strategies/actions that are
adopted can deliver what they are meant to –
i.e. that they are efficacious
Risk Management & Collection Care
RM: tool to be used in collection care
can aid in prioritising collection care activities
aid to communication with others that are not collection focussed
helps to put risks affecting collections on same footing as other risks
