a risky business third sector in a new world of risk. 15 th june 2010 david forster vivian gumble...
TRANSCRIPT
A risky business
Third sector in a new world of risk.
15th June 2010David ForsterVivian GumbleZurich Municipal
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Agenda
Introductions Kevin
What this session is about Kevin
Contributor input David/Vivien
Q&A so far Kevin
Group work Yourselves! +K,V&D
Feedback Kevin
Actions for NAVCA Kevin
Wrap. Kevin
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Quick overview
Why this topic
Barriers to risk management
What risks
Commissioning risk (inc risk allocation and exit strategies)
Current operation risk issues
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Business Risk
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Why be interested in risk management?
Significant crisis impacting on an organisation’s ability to continue are now becoming a one in five year event.
Biggest recession since the war.
With funding resources scarce partners want confidence that you understand and are managing your key risks.
The charity sector is become the major supply to Local Government in terms of Commissioned services (estimated at over £12bn)
Society is less forgiving of failure.
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Why is it then….
Risk management is a paper exercise in a majority of charities?
Most charities feel they gain limited benefit from undertaking risk management?
For most charities it is a once a year process with limited involvement the Board.
What are the barriers to risk management in your experience?
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What risks?
The practical exercise
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What risks?We’ll have a look at these later!
No Risk
1 Recessionary impact - loss of funding both short term and longer term. This creates sustainability issues especially for the smaller charity.
2 Reputation and brand management. The reputation of many charities is the biggest asset they have. All too often it can disappear in the blink of an eye caused by a unforeseen crisis, breach or service failure etc
3 Skills shortages in key areas. Notable skill shortages are around fund raising, quality trustees
and strategic planning. The skill shortages vary dependent upon the size of the charity. This risk is also linked to staff turnover.
4 Stakeholder management has taken a marked change for the worse. The biggest relationship
risk issue is internal with the relationship with trustees followed by relationships with national government.
5 Commissioning / competition between charities (many Charities used to work together – in
many cases they are now direct competitors). Despite the COMPACT many charities fail to maximize commissioning opportunities or struggle to engage with larger public sector partners.
6 Compliance with law and regulation- eg breach of trust law, employment law, and regulatory
requirements of particular activities such as fund-raising or the running of care facilities. 7 Negative policy shifts in key areas at both a local and national level. This normally places extra
burdens on medium to small charities. 8 Governance challenges. These will often be unique to the charity concerned but include Board
CEO relationship issues, Board competency and performance management issues. 9 Secondary recessionary impact of increased demand / coping with demand for services and
amenities. 10 The third sector is not immune from being over taken by crisis and business continuity
events. These range from staffing issues, property access, I.T reliance and adverse weather events.
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New world of risk
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We’ve written this out in a lot of detail in….
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Building resilience
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What do we mean by resilience?
A definition;
‘The ability to survive and thrive in the face of unexpected events and a changing risk landscape’.
How ?
A ‘whole risk’ approachIntegrated risk management and response.
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Designing a resilience approach to risk
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And integrating the disciplines and functions….
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Commissioning Risk
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One of the top risks?RISK No 5 - Fail to maximise public sector commissioning and procurement opportunities
Analyse Plan
Review Do
Commissioning
Purchasing/Contracting
Purpose and guidance Market Analysis Resource Analysis Needs Analysis Risk Analysis
Gap AnalysisJoint Commissioning
StrategyService Design
Strategy Monitoring & Review
Change Management
Budget & MarketManagement
Contract Monitoring & Review
Tendering & ContractManagement
Resource User NeedsProviders
Specification Contract/SLAPurchasing Plan
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Root cause analysis
What are the real risks and issues?
W hy?
W hy? W hy? W hy?
B e cau se .... . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . . .. . . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . . .. . . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . .
B e cau se .... . . . . . . . . . . . . . .. . . . . . . . . . . . . . .
P rob le m ..... . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .
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Conduct a root cause
analysis to understand
the Commissioning
risk
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Strengths, Weaknesses, Opportunities and threats
StrengthsKnowledge to service areaLinks to community / grassrootsPassionExperienceAbility to innovate / flexibilityCommitment to the causeIndependence (trusted)Volunteer base
Weakness Lack of visibility to
Commissioners Risk adverse Lack of evidence to support
results No “walk away” price Lack of key skills Lack of USP Resistance to change
Threats Seen as cheap Funding cuts Sector competition Losing identity of the sector Government initiatives Lack of public sector “penetration” Commissioning / tender timescales Public sector attitude
Opportunities Funding pressure creates the
need for innovation Partnership working Outsourcing by public sector Personalisation Sharing and working across
sectors
Source: Zurich workshops into Commissioning risks run for ACEVO
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Key risk issue: risk allocation
There needs to be clarity at the outset of any arrangement not only what the key risks are but who is allocated the key risk.
There are three options when faced with a risk– Retain responsibility / ownership of the risk [Council]
– Share responsibility / ownership of the risk [Shared]
– Pass responsibility / ownership of the risk [Charity]
Risks are generally transferred through– Use of wording within any agreement
– Agreement of particular elements within the payment mechanism
– Seeking of particular implements such as bonds
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Exit strategy - why?
You shouldn’t go into a partnership with the fear or expectation of failure - however you should have thought through the implications.
Need for a plan B (exit strategy)Minimal disruptionSmooth transitionNo nasty surprises
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Operational Risk
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Why should you be concerned about Health& Safety?
Stop accidents, injury and ill healthFinancial reasons
Costs of claims are on the increaseLegal costsIncreased insurance costsDeductibles/Excess Investigations costs/Other down timeSick pay/Replacement CoverProsecutions/Fines
Reputation including recruitment and retention of staffMoral obligationsLegal obligations – Health and Safety at Work Act 1974 etc, Corporate Manslaughter
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Health and Safety - Corporate Manslaughter
Controlling Mind Principle
High Profile Failures; Lyme Bay, Barrow in Furness
Public Pressure
Adverse Media Attention
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How did we get here?
Courts have always had problem with “controlling (or directing
mind)” in larger organisations
“Controlling Mind” more obvious in smaller organisations
July 2006 the new Bill was published
April 2008 - Corporate Manslaughter and Corporate Homicide
Act 2007
Provision for a new offence of Corporate Manslaughter
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Barrow in Furness
Legionella outbreak in Summer 2002 from Council Leisure CentreHead of Councils Design Services Group accused of Manslaughter of 7 people.Barrow cleared of Corporate Manslaughter, pleads guilty to breaches of the Health and Safety at Work Act.Mrs Beckingham fined £15,000 and Council £125,000 plus £90,000 costs.Judge highlighted that “failings had not only been at the lowest level of the council, but all the way to the top in terms of its serving officers”. What could happen to you now the law has changed?
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The Corporate Manslaughter Act
Gross BreachAn organisation is guilty of a offence if the
way in which any of its activities are managed or organised by its senior managers-(a) causes a persons death, and(b) amounts to a gross breach of a relevant duty of care owed by the organisation to the deceased.
The test asks whether the conduct that constitutes the failure falls far below what could reasonably have been expected.
XYZ Corporate Killer
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Sentencing Guideline
Early in 2010, the Sentencing Guidelines Council published guidelines for ‘Corporate manslaughter and health and safety offences causing death’.
FineRemedial OrderPublicity Order
Fines for organisations found guilty should seldom be less than £500,000 in order to act as a deterrent.
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Sentencing Guidelines – The Fine
Aggravating factors?– More than one person killed or seriously injured.– Failure to act on advice– Profit before safety– Corporate culture encouraging breaches– Failure to listen to employees
Mitigating factors?– Remedial actions– General responsible attitude to safety– Previous good safety record– Guilty plea
In the case of Public Sector, the likely effect of a very large fine on public services may be weighed against the above.
What about the third sector?
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“Board level involvement is an essential part of the21st century trading ethic. Attitudes to health and safety are
determined by the bosses, not the organisation’s size.”
“An organisation will never be able to achieve the higheststandards of health and safety management without the active
involvement of directors. External stakeholders viewing theorganisation will observe the lack of direction.”
“Health and safety is a fundamental part of business. Boardsneed someone with passion and energy to ensure it stays at the
core of the organisation.”
Quotes from health and safety leaders in the public and private sectors.
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“Leading health and safety at work” www.hse.gov.uk/leadership
DELIVER
REVIEW
PLAN
MONITOR
Leadership Actions Directors
& Board Members
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A sensible approach?
Sensible Risk Management is:-Employees are properly protectedBalancing benefits and risksInnovation and learningThose who create risks manage themEnable individuals to understand the right to protection but must act responsibly
Sensible Risk Management is NOT:-Creating a totally risk free societyGenerating paperwork mountainsScaring people with trivial risksStopping important recreational and learning activitiesReducing the protection of people from real risks
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“Reasonably practicable”
Likelihood that someone will be injured
Seriousness of the injury
Social value / positive result of the activity
Cost of preventative measures
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Summary
So will Risk Management reduce the possibility of any accusation
of Corporate Manslaughter?
Almost certainly - Yes
Why? - because you will be able to show a provable documented
prioritised approach to all risks
- this means from the setting of overall corporate strategies
right through to the front line operational requirements.
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Agenda
Introductions Kevin
What this session is about Kevin
Contributor input David/Vivien
Q&A so far Kevin
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Agenda
Introductions Kevin
What this session is about Kevin
Contributor input David/Vivien
Q&A so far Kevin
Group work Yourselves! +K,V&D
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What risks?
The practical exercise
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What risks?We’ll have a look at these later!
No Risk
1 Recessionary impact - loss of funding both short term and longer term. This creates sustainability issues especially for the smaller charity.
2 Reputation and brand management. The reputation of many charities is the biggest asset they have. All too often it can disappear in the blink of an eye caused by a unforeseen crisis, breach or service failure etc
3 Skills shortages in key areas. Notable skill shortages are around fund raising, quality trustees
and strategic planning. The skill shortages vary dependent upon the size of the charity. This risk is also linked to staff turnover.
4 Stakeholder management has taken a marked change for the worse. The biggest relationship
risk issue is internal with the relationship with trustees followed by relationships with national government.
5 Commissioning / competition between charities (many Charities used to work together – in
many cases they are now direct competitors). Despite the COMPACT many charities fail to maximize commissioning opportunities or struggle to engage with larger public sector partners.
6 Compliance with law and regulation- eg breach of trust law, employment law, and regulatory
requirements of particular activities such as fund-raising or the running of care facilities. 7 Negative policy shifts in key areas at both a local and national level. This normally places extra
burdens on medium to small charities. 8 Governance challenges. These will often be unique to the charity concerned but include Board
CEO relationship issues, Board competency and performance management issues. 9 Secondary recessionary impact of increased demand / coping with demand for services and
amenities. 10 The third sector is not immune from being over taken by crisis and business continuity
events. These range from staffing issues, property access, I.T reliance and adverse weather events.
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Agenda
Introductions Kevin
What this session is about Kevin
Contributor input David/Vivien
Q&A so far Kevin
Group work Yourselves! +K,V&D
Feedback Kevin
Actions for NAVCA Kevin
Wrap. Kevin
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Question time?
Thank you for listening
David Forster Vivien GumblePractice Leader Risk Consultant
Zurich Risk Engineering126 Hagley Road, Birmingham B16 9PF
Email [email protected]@uk.zurich.com