risk management - “local government pitfalls.” imfo – sustainability workshop risk management...
TRANSCRIPT
Risk Management - “Local Government Pitfalls.”
IMFO – Sustainability Workshop
Risk Management
30 March 2012
www.pwc.com/za/en/consulting
1 The “big” picture 1
2 Why Risk Management? 3
3 Enablers – policy, strategy, structure, capacity, tools and funding
4
4 Enterprise Risk Management 9
5 Risk identification 11
6 Risk assessment 13
7 Risk response 15
8 Communication/reporting 17
9 Roles and responsibilities 19
10 Questions 21
PageSection Overview
Table of Contents
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Section 1The “big” Picture
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The “big” picture• Maintain an effective, efficient and transparent systems of risk
management
• Legislative mandate - MFMA sec 62(1)(c)(i)
• Whom - Accounting officers
• Public Sector Risk Management Framework
Section 1 – The “big” picture
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Section 2Why Risk Management?
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Why Risk Management?1. Sustainable service delivery
2. Reduction in fruitless and wasteful expenditure
3. Innovation
4. Informed decision making
5. Prevent fraud ….and corruption
6. Enhance project and programme management
7. Enhance oversight capability
Section 2 – Why Risk Management?
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Section 3Enablers
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EnablersSection 3 – Enablers
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EnablersSection 3 – Enablers
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EnablersSection 3 – Enablers
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EnablersSection 3 – Enablers
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Section 4Enterprise Risk Management
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Enterprise Risk Management
• Institutional application of risk management
• Interdependent dynamic risks
• View of internal and external risks
• Identify and communicate external risks with other organs of state
• “Risks must be considered from strategy to service delivery outcomes”
Section 4 – Enterprise Risk Management
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Enterprise Risk Management
Why Enterprise Risk Management initiatives fail
•Risk Management strategies are developed in silos
•Lack of buy-in from management (Funding)
•Bottom-up rather than top-down approach
•One person is tasked with performing everything
•ERM is perceived to be an CRO issue
•Risk information is developed without input from the business
•Poor ERM culture in the organisation
•Lack of change and maintenance procedures
Section 4 – Enterprise Risk Management
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Section 5Risk Identification
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Risk Identification• “process to identify and document risks”
• Must be ongoing
• Identify all risk – in control or not?
• Risk workshops , interviews
• Use internal and external audit reports
• Financial and data analysis
• Benchmarking
• Focus on :
• Strategic risks
• Operational risk
• Project risks
Section 5 – Risk Identification
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Section 6Risk Assessment
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Risk Assessment• “quantify and qualify risks”
• Assist to prioritise risks
• Likelihood of occurrence and impact objectives
• 3 stages:
• Inherent
• Residual risk to determine the level of risk after mitigation
• Residual risk vs appetite
• Assessment at least once a year
Section 6 – Risk Assessment
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Section 7Risk Response
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Risk Response• “reduce or eliminate risks”
• Exploit opportunities
• Range of options for mitigation
• Response strategies for all material risks
• Strategies must consider:
• Avoiding risks – abort activity
• Treatment – enhance internal control
• Transfer – co- sourcing
• Accepting – cost and consideration rule out alternatives
• Exploiting – turn the risk on its head!
• Designing control activities to mitigate risks – internal control architecture to prevent, detect, and correct
Section 7 – Risk Response
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Section 8Communication / Reporting
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Communication / Reporting• Communication equips officials to identify, assess and respond to risks
• This is done through dissemination of information and communicating responsibilities and actions
• Monitoring will inform whether the risk management processes are functioning effectively
• Responsibilities are executed
• Strategies are producing results
• Improvement is risks management system has a direct correlation with performance
Challenge: Lack of communication, in effective and uncertainty of who should be the monitor
Section 8 – Communication / Reporting
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Section 9Roles and Responsibilities
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Roles and ResponsibilitiesSection 9 – Roles and Responsibilities
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• Framework clearly sets out the functions of:
• Executive Authority
• The Accounting officer
• Audit Committee
• Risk committee
• CRO
• Management
• All officials
• Internal and external audit
Challenge still remains in the understanding of functions and this is because of the Buy in and the perception of RM
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Section 4Questions
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