Hannington Parish Council, Hampshire
Don't be daunted by this topic! We all do it (risk management) every hour of the day; when we cross the road (looking left-right-left), when we turn on the light (having a fuse box), when we go out (locking the door), driving the car (insurance, triangle, maps, spare fuel etc). The only difference is that 'we' don't identify, assess, evaluate and act, in a formalised, structured and documented way. Organisations, like the Parish Council do not have this option. We have a responsibility for 'the parish' in both the short and long term, and to the residents and the public who may be simply passing through it by car, by foot, by bicycle or by horse!
Risk Management is an attempt to reach out into the uncertainty of the future and bring it under control, in order to achieve the objectives of an organisation, in this case Hannington Parish Council. This can be achieved through a process of identification, assessment, evaluation and treatment of risk.
Once undertaken, risk management can help an organization achieve its Aims and Objectives through the awareness and management of risk, including the exploitation of new opportunities, for example accessing specific grants, in a challenging competitive environment.
What is risk?
The definition used in ISO Guide 73:2009 Vocabulary for Risk Management is: “…the effect of uncertainty on objectives..” It is important to note that risk is not just uncertainty of future events, it is the uncertainty of the effect of specific events which could have an impact on achieving the aims and objectives of an organisation. It is recognised that the effects caused by uncertain events can have negative effects, but there is also the potential for beneficial effects.
What is risk management?
Risk management includes the identification and analysis of risks (negative and beneficial) to which an organisation is exposed, the assessment of potential impacts on the business, deciding what action can be taken to eliminate or reduce negative risk, or to exploit or enhance beneficial risk. Risk management is not intended to eliminate all risk. Risk is an intrinsic part of enterprise and, when fully implemented, a risk management process can actually encourage increased appetite for risk, because risks have been identified and their impact is being managed.
Why have risk management systems?
It may seem that the risks to an organisation are obvious, and that other risks are of such a low impact or likelihood that formalised management systems aren't unnecessary. In the short term this may seem to be a viable cost saving option; however it is not a good footing to ensure the long term delivery of the Council’s objectives. Dealing with each risk as and when it arises (a fire fighting approach), will be more resource intensive in the long run, and promotes an unsystematic approach to dealing with risk, taking up valuable Councillor’s time.
Effective risk management systems with an analysis of all the possible risks allows for a true appreciation of the overall exposure to risk and prepares the Council, for less potential loss or damage and to seize potential opportunities.
Some of the benefits of having effective risk management systems are set out below. The extent to which these benefits are realised depends on a number of factors such as: the thoroughness of the initial evaluation, the regularity of review and follow up, and the communication and embedding of the risk management process in the Council.
* A systematic, well-informed and thorough method of decision making;
* Fewer financial surprises with unforeseen costs;
* Faster decision making and taking;
* A greater likelihood of a more predictable, secure, income stream;
* Stakeholders eg Hannington residents are likely to be reassured;
* A reduced likelihood of reputation damage;
* Access to opportunities that an organization may have otherwise not been aware of, and enables a faster grasp of such opportunities;
* A better basis for the allocation of resources;
* Greater likelihood of achieving the organisation’s objectives.