Opportunity and Risk Mgmt

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Contents Foreword Statement of Intent Part 1

Part 2 Part 3

Part 4

Part 5 Part 6

3 4

The Risk and Opportunity Management Framework 1.1 Introduction 1.2 Process

4 5

Identification 2.1 Identification

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Evaluation 3.1 Introduction 3.2 Risk and Opportunity Matrix

9 10

Management 4.1 Introduction 4.2 Resource and Cost Benefit Analysis 4.3 Risk and Opportunity Register 4.4 Risk and Opportunity Escalation

13 14 15 15

Review 5.1 Review

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Roles and Responsibilities 6.1 Political Accountability 6.2 Managerial Accountability 6.3 Staff Accountability 6.4 Corporate Accountability 6.5 Other Accountability

18 18 19 20 20

Glossary Appendix 1 – Risk and Opportunity Template Appendix 2 – Risk Example

21 22 23

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Foreword Thurrock’s character and personality has formed and evolved over centuries as agriculture, industry and the river have shaped the landscape, the make-up of its people and the quality of life. The enduring characteristics of those who live or have lived and worked in the borough – enterprise, resilience, opportunism, adaptability – represent a strength of spirit. It is this spirit that will drive a new tone and a fresh relationship between the council and everyone it does business with and is captured in the council’s vision and priorities: “We want Thurrock to be the dynamic heart of the Thames Gateway, a place of ambition, enterprise and opportunity, where communities and businesses flourish and the quality of life for local people is continually improving. 1. Improve the education and skills of local people 2. Encourage and promote job creation and economic prosperity 3. Ensure a safe, clean and green environment 4. Provide and commission high quality and accessible services that meet, wherever possible, individual needs 5. Build pride, respect and responsibility in Thurrock’s communities and its residents.” 2011 is the 75th anniversary of Thurrock as a Borough and marks the start of a new phase of opportunity for the next generation – the next generation of young people, older people, families, vulnerable people – the next generation of people who have an opportunity to benefit from the future prosperity of the borough. The current regeneration programme will once again change the landscape, with the expansion of retail and Lakeside, the creation of the biggest container port in Europe, the Royal Opera House Production Park and performing arts, to name a few. All of these will bring new jobs and fresh opportunities for the future. How people feel about where they live, how they feel about their public services, how they feel about themselves will be central to creating a collective sense of identity and direction. One in which people aspire for themselves and for their families to do well in their education, are equipped to take on the new and different types of jobs available, have the best possible quality of life and are proud of where they live. Thurrock Council will be changing and adapting to help achieve this, enabling and facilitating change, preparing its residents for the new opportunities, engaging and involving, more in tune and in touch with the needs of local residents, partners, businesses and its employees, aligning expectations and aspirations. The current economic downturn provides an opportunity and a catalyst for operating differently and valuing the perspectives of everyone who has a stake in the future of the Borough. Success will be characterised by us being a confident, well-managed and influential council, regarded by residents, peers and partners as ambitious for the people of Thurrock and totally focussed on meeting its current and future aspirations. The aim of the risk and opportunity policy, framework and strategy is to improve the Council’s ability to deliver these ambitions by managing the risk to and the opportunities for the achievement of the Council’s priorities and objectives.

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Policy Statement The Council’s Risk and Opportunity Management Framework and Strategy aims to apply good practice to the identification, evaluation and management of the risks to and opportunities for the achievement of the Council’s priorities and objectives. The Risk and Opportunity Management Framework and Strategy will be reviewed each year against good practice to ensure that they are fit for purpose and continue to drive forward a robust approach to risk and opportunity management. This framework and strategy explains the Council’s approach to risk and opportunity management and the arrangements that will operate to ensure that risks and opportunities are effectively identified, evaluated and managed.

Part 1 – The Risk and Opportunity Management Framework 1.1 Introduction The management of risk and opportunity is now acknowledged as a feature of public sector management. It is an integral part of the Council’s Corporate Governance arrangements and the Council has a statutory responsibility under the Account and Audit Regulations to put in place arrangements for the management of risks. Risk and opportunity management describes the approach used to identify, evaluate and manage the whole range of business risks and opportunities facing an organisation. Thurrock Council’s definition of Risk and Opportunity Management is: “the planned and systematic approach to identify, evaluate and manage the risk to and the opportunities for the achievement of objectives” The Council’s aim for risk and opportunity management is to: • Embed risk and opportunity management into the culture of the Council. • Integrate risk and opportunity management with other management practices to ensure that risk and opportunities are managed effectively at strategic and operational level & for all key projects and partnerships. • Identify and effectively manage the key risks and opportunities facing the Council. • Maximise the opportunities for the achievement of objectives and minimise the risk of service failure. • Learn from opportunity outcomes and risk failures to improve risk and opportunity management awareness, systems and processes. • Support Members and managers in carrying out their responsibilities. • Support the decision making process at all levels within the Council. • Ensure that effective risk and opportunity management arrangements are in place to support the Annual Governance Statement and Corporate Governance arrangements. • To comply with the requirements of the Account & Audit Regulations. The risk and opportunity management process is designed to ensure that the key risks to, and the opportunities for, the achievement of objectives are identified and managed. Too little awareness and management of these key issues can impact on performance but an obsessive level of management of all possible risk and opportunity could easily overwhelm the Council. Between these two extremes is a turning point, a balanced area of high performance through the sensible management of risk and opportunity and this is the status the Council aims to achieve through implementation of its Risk and Opportunity Management Policy, Framework and Strategy.

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Sensible management of risk and opportunity to add value

1.2 Process The Council has a four-step cycle for identifying, evaluating, managing and reviewing risk/opportunity. The process is outlined below and described in subsequent parts of the framework.

Risk and Opportunity Management Process

Part 2 – Identification 2.1 Identification What is a risk or opportunity? A risk or opportunity is: “an uncertainty that could have adverse or beneficial effects on the achievement of objectives”

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The initial stage of risk and opportunity management sets out to identify the exposure to these uncertainties. This requires knowledge of the service, the market in which it operates, the legal, social, political and cultural environment in which it exists, as well as the development of a sound understanding of its strategic and operational objectives, including factors critical to success and the achievement of objectives. Corporate objectives are set out in the Corporate Plan/Medium Term Financial Strategy and Service objectives are shown in Service Plans. Service plans outline how the service contributes to delivering the corporate objectives. They also include details of any corporate or cross cutting objectives that directly or indirectly affect the service as well as any objectives for key projects that the service is responsible for, or contributing to during the course of the year. There are likely to be some risks or opportunities that could have adverse or beneficial effects on the achievement of objectives. The establishment of a Service Risk and Opportunity Register proactively manages the main risks and opportunities that services face and helps the Council identify and manage priority issues. The priority issues that have corporate or strategic significance will then feed directly into the Strategic/Corporate Risk and Opportunity Register. For this reason it is important that every service and key project has an up to date and regularly reviewed Risk and Opportunity Register. The starting point for services should be the corporate objectives as shown in the Corporate Plan/Medium Term Financial Strategy and the service objectives set out in the service plan. There will be overlap here as the service is delivering corporate objectives. There will also be some cross cutting corporate objectives that impact on the service, as well as objectives that the service has for key projects. Key project risks or opportunities may be contained within the service or the corporate/strategic risk and opportunity register as well as the project risk and opportunity register. It is clear that only those risks and opportunities that have been identified can be managed, therefore the more comprehensive the approach to identification, the better placed the service will be to manage risk and opportunity. The diagram below outlines some of the key categories of risk and opportunity facing the Council.

Categories of Risk and Opportunity

The tables on pages 7 to 8 provide some further information and examples of issues that may arise for each of the categories. The categories are neither prescriptive nor exhaustive but provide a prompt for identifying a broad range of risks/opportunities facing the Council and draws on identification techniques such as PESTLE (Political, Economic, Social, Technical, Legal, Environmental), Operational and SWOT (strengths, weaknesses, opportunities and threats) analyses.

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PESTLE Analysis

Political.

Arising from the political situation • • • • • • • •

Change in Government Policy Change of Local Policy and Strategic Priorities Delivery of policy and priorities. Election cycles Political make-up Leadership issues. Decision making structure Political personalities

• • •

Political uncertainty (e.g. challenging decisions with significant political consequences or local repercussions). Response to potential transformation in local government Reputation

Economic.

Arising from the national, local and organization specific economic situation • • • • • • • •

Treasury – Investments, reforms, budget cuts. General and regional economic situation. Prolonged recession and recovery. Borrowing, lending situations, investments and interest rates. Budgetary position. Key employment sectors (existing and future). Poverty indicators. Demand predications (e.g. on demand led services like social care).

• • •

Competition between suppliers and the affect on service/pricing. Increase employment, education and training Impact on regeneration schemes

Technological.

Social.

Arising from national and local demographics and social trends • • • • • • •

Demographic profile (age, race, etc). Social changes – needs, expectations and attitudes Residential patterns / profile (e.g. commuter belt, state of housing stock, public/private mix). Health statistics/trends – health inequalities. Leisure and cultural provision. Crime statistics/trends. Children at risk

• • • • •

Older people – ageing population. Employment. Life-long learning. Regeneration. Disadvantaged groups or communities.

Arising from technological change and organizational technological situation • • • • • • •

Technological strategy Technological change/advance – capacity to deal with change/advance. Current use of/reliance on technology. Current or proposed technology partners. State of architecture. Obsolescence of technology. Current performance and reliability.

• • • • • •

Security and standards Resilience, back up and disaster recovery arrangements. Technological demand – customer needs and expectations Technological support for innovation. Procurement of best technology and sustainability of systems. Data security/protection – Council and supply chain partners with who information is transferred or shared.

Environmental

Legislative / Regulatory.

Arising from current and potential legal changes and the organisation’s regulatory information. • • • • • • • •

New and existing legislation – National and European Law Inspection/Regulators (e.g. CSCI, OFSTED). Regulation – Self Regulation, Governance Standards European Directives – e.g. procurement Localism Bill Impact of the Health Reform Impact of the Police Reform Equality Act

• • • • • •

Human Rights Employment Law Health & Safety Section 17 Crime & Disorder Act Civil Contingencies Act – Category 1 Responder statutory duty. Statutory duties - Capability & capacity to meet duties

Arising from inherent issues concerned with the physical environmental. • • • • • • •

Nature of environment (e.g. urban, rural). Land use – green belt, brown field sites. Waste disposal and recycling issues. Exposure to drainage problems (e.g. flooding, subsidence). Pollution (e.g. emissions, noise). Climate Change and impact of severe weather (e.g. flood, heat wave, drought, snow). Carbon Reduction

• • • •

Energy Efficiency Traffic congestion and emissions. Encourage the use of public transport, cycling, walking, etc. Crime & disorder – e.g. Reduce crime, ASB, fly tipping, vandalism ( & the fear of crime).

Prompt for identifying and categorising risks/opportunities

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Operational Analysis

Competitive.

Arising from the organisation’s competitive spirit and the competitiveness of services, etc. • • • • • • •

Benchmarking. Relationships with neighbours and partners, e.g. competitive or collaborative. Plaudits held/sought, e.g. LGC awards. Success in securing funding. Nature of service provision. Competition for service users. e.g. car parks. Value for money – cost & quality of service.

•

Public Service model against Private Sector, Other Agency or Community model.

Professional / Managerial.

Customer / Citizen.

Arising from the need to meet current & changing needs or expectations of customers and citizens. • • • • • • • •

Customer Care Extent and nature of consultation with/involvement of community. Demographics – analysis, understanding. Relationship with community leaders and groups. Service delivery – response, feedback, complaints, compliments. Community Cohesion Visibility of services e.g. refuse collection, street cleaning, etc. Public and media communication

• • •

Consultation and communication of service changes to stakeholders Reputation management – Retain public trust and confidence in the Council and its services. Complaints and Compliments – e.g. Increase in complaint numbers, learning from complaints or compliments.

Arising from the need to be managerially and professionally competent. • • • • • •

Views arising from peer reviews – e.g. internal audit, consultancy review, etc. Professional/managerial standing of key officers. Stability of officer structure/management teams. Competency and capacity – Organisational and Individual. Key staff changes and personalities. Turnover, recruitment and retention, talent management & succession planning.

• • • • • •

Workforce planning & development - Right skills, people & employee capacity Management Capacity – Change, Financial, Performance, Risk/Opportunity, Asset & Crisis Management and management of key partnerships/contracts Management frameworks & processes – efficient, effective. Mission, Vision and Values. Statutory duties – Capability and capacity to meet duties. Organisational change and Transformation of the Council & Services.

Financial.

Arising from the financial planning and control framework. • • • • • • • •

Funding from Government and other external funding Financial situation of authority and level of reserves. Budgetary policy and control. Delegation of budget and financial disciplines. Monitoring and reporting systems. Control weaknesses – anti fraud & corruption Income and Revenue. Capital Programme. Procurement – e.g. Consortium purchase schemes, reduced market.

• • • • • • •

Insurance – adequacy of covers, level of self-funding, deductibles, etc. Fraud/bribery/corruption and impact of compensation culture. Interest rates, inflation, income tax, asset values, etc. Efficiency, invest in priorities, disinvestments non-priority areas. Short term budget challenges v long term challenges – strategic planning of budget cuts. Impact of prolonged recession. Statutory duties – Resource / capacity to meet duties

Legal.

Arising form changes to legislation and / or possible breaches of legislation. • • • • • • •

Legal challenges, judicial review Adequacy of legal support. Boundaries of corporate & personal liabilities. Sufficient reserves to defend legal challenge or unrecorded liabilities. Damage to reputation arising from legislation breach. Partnerships – Legal Liabilities, contractual liabilities. Employment disputes

Partnership / Contractual.

Physical.

Arising from physical hazards or possible gains associated with people, land, buildings, vehicles, plant & equipment. • • • • • •

Commitment to health, safety and well being of staff, partners and the community. Assets - Nature and state of asset base, including record keeping. Accident and incident record keeping. Maintenance practices. Resilience & Business Continuity Security - staff, assets, buildings, equipment, plant, machinery, vehicles, data and information, etc

• • • • •

Health - improve health, reduce health inequalities & promote healthy lifestyles Staff morale and sickness absence (e.g. stress) Community Resilience to major incidents Employment or industrial disputes. Safeguarding vulnerable people – e.g. children, young people, adults.

• • • • • • •

Legal and contractual liabilities. Partner or supply chain failure – e.g. financial, data loss, governance, etc Reputation management – e.g. Third party supply chain failure. Strategic Commissioning of Services – Capacity, experience expertise. Change control and exit strategy arrangements Impact of local public services cuts on the community and partner organizations Joint projects

Arising from partnerships and contracts. • • • • • • • •

Relationships with partners/contractors Accountability frameworks and partnership boundaries. Outsourcing and Insourcing. Shared resource or services Procurement arrangements / contract renewal policy. Performance of partnerships/contractors Partnership resilience – business continuity arrangements. Performance/client management of partnerships/suppliers - capacity.

Prompt for identifying and categorising risks/opportunities 8

The risks and opportunities identified need to be recorded in structured format. A description covering the Cause, Event and Effect is used to scope a risk or opportunity. Some typical phrasing or statements are outlined below: Cause / Event / Effect Because of … may occur, … Due to … Event / Cause / Effect Risk of … Failure to … Failure of … Lack of … Loss of … Uncertainty of … Delay in … Inability to … Inadequate … Partnership with … Development of … Opportunity to …

… due to …

… which would lead to

… leads to … and/or … results in …

Part 3 – Evaluation 3.1 Evaluation Stage 1 - Unmanaged Risk / Opportunity Once the risk or opportunity has been identified and defined the issue needs to be evaluated without any controls, actions or management arrangements in place to establish the Inherent risk/opportunity rating. The diagram below provides an illustration of how risks and opportunities are recorded for the initial evaluation. Enter Risk/Opportunity description and date identified in the template. Stage 1 – Unmanaged Risk / Opportunity (inherent R/O rating) No.

Risk or Opportunity Description

1.

The Council faces a budget shortfall for the financial year ending 31/03/11 with the impact of reductions in public spending and the recession. Failure to develop effective short to medium term plans to manage the position leads to financial difficulties, service pressures and a breakdown in the pursuit of the Council’s priorities, resulting in poor delivery of the Council’s objectives/services. Date Identified Inherent R/O Rating 21/10/2009 Critical / Very High Template and example for Stage 1.

By using the ‘Criteria Guide for Impact and Likelihood Ratings’ table on pages 11 and 12 the potential impact and the likelihood of the issue occurring without any controls, action or management arrangements in place can be determined. The potential impact of risk is expressed in terms of: (I) Critical, (II) Substantial, (III) Marginal, (IV) Negligible and determined by considering the risk and the consequences (effects) outlined in the risk description. The potential impact of opportunity is expressed in terms of: (I) Exceptional, (II) Major, (III) Moderate, (IV) Minor and determined by considering the opportunity and the benefits (effects) outlined in the opportunity description. The likelihood of the risk or opportunity occurring is expressed in terms of: (A) Very High, (B) High, (C) Significant, (D) Low, (E) Very Low, (F) Almost Impossible and determined by considering the risk or opportunity description. The results of the evaluation of impact and likelihood should be recorded in the Inherent R/O Rating column of the template. 9

Stage 2 – Current Risk / Opportunity The risk or opportunity identified in stage 1 is now re-assessed to take into account what is currently in place to manage the issue (e.g. mitigate the risk or maximize the opportunity). These controls or actions including dates for when the controls/actions were commenced and /or completed should be recorded in the Current Control/Action column in stage 2 of the template. Stage 2 – Current Risk / Opportunity (residual R/O rating) - see below Current Controls or Action

Residual R/O Rating

1. Develop by July 2010 the medium term financial strategy (MTFS) to ensure financial pressures are known & transparent

Critical / High

Assurance on Controls / Action 1. Regularly reviewed by the Head of Corp. Finance & Director of Finance & Corporate Governance

Template and example for Stage 2.

Assurance details of what is in place to check that the management controls or actions are working, appropriately and effectively should be recorded in the Assurance in Place column of the template. Frequency of the assurance arrangements should be included, where appropriate. Assurance is normally obtained through performance monitoring or management review arrangements. If there are any gaps, further action should be taken to check that the current management arrangements are working properly and effectively. When all the current controls or actions and assurance arrangements are determined the risk or opportunity can be re-assessed by using the Criteria Guide for Impact and Likelihood Ratings table on pages 11 and 12. The assessment should reflect the Council’s current position in relation to the risk or opportunity. The potential impact of risk is determined by the risk, consequences (effects) and the current controls, action or management arrangements in place. The potential impact of opportunity is determined by the opportunity, benefits (effects) and the current action or management arrangements in place. The likelihood of risk or opportunity occurring is determined by considering the risk or opportunity description and the current controls, action and management arrangements that are in place. The results of the evaluation of impact and likelihood should be recorded in the Residual R/O Rating column of the template.

3.2 Risk and Opportunity Matrix The results of the likelihood and impact assessments should be recorded on the Risk and Opportunity Matrix by using the risk/opportunity number as a reference. The Matrix and Criteria Guide for Likelihood and Impact Levels on pages 11 and 12 outlines the Council’s appetite for risk and opportunity and is used to prioritize the issues identified. The Red, Amber and Blue indicators in the matrix show the hierarchy of risk and opportunity. Red shows those areas of risk/opportunity that are high priority, Amber medium priority and Blue low priority.

Risk and Opportunity Matrix 10

Risk Negative Impact

I Critical

II Substantial

III Marginal

Description • • • • • • • • • • • • • • • • • • • • • • • • • •

IV Negligible

• • • • • • • • •

Inability to deliver a no. of org’l priorities or strategic obj’s. Major disruption to a number of important services. Loss of life. Extensive coverage in national press and broadsheet editorial and/or national TV. Major local & significant national/international env. damage. Huge financial loss >£1M in a year. Huge impact on ability to achieve the project’s objectives. Huge disruption to project. Inability to deliver an org’l priority or strategic objective. Major disruption to important service. Extensive/multiple injuries Coverage in national press &/or low coverage on national TV Major damage to local environment. Major financial loss >£500K - £100K - £250K - £100K -