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A Practical Approach to Risk Management

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1 A Practical Approach to Risk Management
Financial Management Institute, Toronto Chapter February Corinne Berinstein, BPT, MBA, MHSC, CA, CFI Health Audit Services Team Ontario Internal Audit Division

2 Contact Info: Corinne Berinstein, BPT, MBA, MHSC, CA, CFI, Certificate in Risk Management (Canadian Health Care Association Senior Audit Manager Health Audit Services Team Ontario Internal Audit Division Province of Ontario Office:

3 Basic Concepts

4 Outline Objectives of today’s session
Basic principles, concepts, definitions A simple framework Stocking your toolkit – education, job aids, templates What are you going to do back in the office? Q &A’s A case – Let’s practice!

5 Objectives Give you a practical approach, framework and tools so you can start implementing ERM when you get back to the office. Share some lessons learned. Share some tips and tricks. Practice concepts and tools with a case study so that you practice

6 Why do we need Risk Management?
The only alternative to risk management is crisis management --- and crisis management is much more expensive, time consuming and embarrassing. JAMES LAM, Enterprise Risk Management, Wiley Finance © 2003 Without good risk management practices, government cannot manage its resources effectively. Risk management means more than preparing for the worst; it also means taking advantage of opportunities to improve services or lower costs. Sheila Fraser, Auditor General of Canada

7 Why bother with RM? Increase risk awareness – What could affect the achievement of objectives? What could change? What could go wrong? What could go right? Increase understanding of risk – sensitivities. What makes my risks increase/decrease/disappear? Promote a “healthy” risk culture – It’s safe to talk about risk. Open and transparent. Develop a common and consistent approach to risk across the organization. Not intuition-based.

8 Why bother with RM? Allows intelligent “informed” risk-taking.
Focuses efforts –helps prioritize. Top 10 list. Or top 3. Or… Is proactive…. not reactive – Prepare for risks before they happen. Identify risks and develop appropriate risk mitigating strategies. Improve outcomes – achievement of objectives (corporate, clinical, etc) Really comes to down to simple good management Enables accountability, transparency and responsibility And maybe even mean survival

9 Basic principles, concepts, definitions
A risk is ANYTHING that may affect the achievement of an organization’s objectives. It is the UNCERTAINTY that surrounds future events and outcomes. It is the expression of the likelihood and impact of an event with the potential to influence the achievement of an organization’s objectives.

10 Threats and opportunities
Threat – a risk that may HINDER the achievement of objectives Opportunities - a risk that may HELP in the achievement of objectives Interest rates Foreign exchange rates Supply of service/product/resources Demand/uptake for service/product/resources The economy The weather The stock market

11 Interactive Session #1 – 10 minutes
Introduce yourselves to others at your table Pick 1 risk – discuss it as both a threat and an opportunity Report to the large group. Pick a spokesperson.

12 Definition of ERM “… a process, effected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.” Source: COSO Enterprise Risk Management – Integrated Framework The Committee of Sponsoring Organizations of the Treadway Commission (COSO)

13 Enterprise vs Integrated Risk Management
Similarities: Formal process Consistent and systematic Includes projects, programs, operations Is embedded in key processes such as strategic planning, budgeting, project planning, evaluation, etc Must be driven and supported by Leadership Adds value to decision-making Differences: Enterprise-wide: Is organizational-centric Success is defined as implementation over the entire organization Integrated: Take a systems-focus May actually create risks for individual organizations

14 Enterprise Risk Management
Division Level Periodic Summary Analysis & Report Branch Level Periodic Summary Analysis & Report Unit or Project Level

15 Integrated Risk Management
System Level Periodic Summary Analysis & Report Regional Level Periodic Summary Analysis & Report Organiz-ational Level

16 Risk Management Basics
Risk (uncertainty) may affect the achievement of objectives. Effective mitigation strategies/controls can reduce negative risks or increase opportunities. Residual risk is the level of risk after evaluating the effectiveness of controls. Acceptance and action should be based on residual risk levels. INHERENT Slide 16

17 Communicate, learn, improve
A Simple Framework Evaluate & Take Action Establish Objectives Identify Risks & Controls Assess Monitor & Report Step 1 Step 2 Step 3 Step 4 Step 5 Communicate, learn, improve

18 Risk Management is critical to ALL levels of decisions
The HM Treasury’s The Orange Book Decisions can be categorized into three types. The amount of risk (uncertainty) varies with the type of decisions. Most decisions are concerned with implementation.

19 The relationship between IRM & MOHLTC’s Complex Risk Environment

20 Categorizing Risk – Comprehensive
Political or Reputational Risk Financial Risk Service Delivery or Operational Risk People / HR Risk Information/Knowledge Risk Strategic / Policy Risk Stakeholder Satisfaction / Public Perception Risk Legal / Compliance Risk Technology Risk Governance / Organizational Risk Privacy Risk Security Risk Equity Risk Patient Safety 1. Financial Risk - The risk of financial losses, overspending, or the inability to meet budgets and plans. 2. Service Delivery or Operational Risk - The risk that products or services will not get completed or delivered in a timely manner as expected. This also includes risks to business continuity. 3. People / HR Risk - The risk that capable & motivated staff will not be available to get the job done. This could be the result of resignations, turnovers, inability to hire, lack of skills, strikes, injury etc. 4. Information Risk- The risk that information produced, or used, is incomplete, out-of-date, inaccurate, irrelevant, or inappropriately disclosed 5. Strategic / Policy Risk -The risk that strategies and policies fail to achieve required results 6. Stakeholder Satisfaction / Public Perception Risk - The risk of failure to meet expectations of the public, other governments, ministries, or other stakeholders 7. Legal / Compliance Risk- The risk that a government initiative, or action, will be in breach of a statute, regulation, contract, MOU, or that the government will face litigation 8. Technology Risks- Risk that information technology infrastructure does not align with business requirements, and does not support availability, access, integrity, relevance, and security of data. This also includes risks to business continuity 9. Governance / Organizational Risk- Risk that the organization structure, accountabilities, or responsibilities are not designed, communicated, or implemented to meet the organization’s objectives, and the risk that business culture and management commitment does not support the formal structures 10. Privacy Risk- Risk that associated with the collection, use and disclosure of personal information and personal health information. 11. Security Risk- Risk that is associated with the protection of confidentiality, integrity, availability and value of assets (tangible and intangible) and people. NEW Slide 20

21 Risk Prioritization – likelihood and impact
Likelihood of a risk event occurring Very High: Is almost certain to occur High: Is likely to occur Medium: Is as likely as not to occur Low: May occur occasionally Very Low: Unlikely to occur Risk Impact: Level of damage that can occur when a risk event occurs Very High: Threatens the success of the project High: Substantial impact on time, cost or quality Medium: Notable impact on time, cost or quality Low: Minor impact on time, cost or quality Very Low: Negligible impact In phase I we facilitated a number of IRM activities. Here are three examples: Oak Ridge Facility at the Mental Health Centre Penetanguishene Colorectal Cancer Screening Program LHIN Readiness I and II These 3 examples showed us how we could implement IRM. Sharon Zwicker told us: put in quote Marsha Barnes told us: put in quote Gail Paech told us: put in quote Carrie Hayward told us: put in quote Slide 21

22 Third dimension for rating risks - proximity
Immediate – now Less than 6 months Between 6-12 months Between 12 – 24 months Between 24 – 36 months More than 36 months

23 Risk rating …Combining impact and likelihood
In phase I we facilitated a number of IRM activities. Here are three examples: Oak Ridge Facility at the Mental Health Centre Penetanguishene Colorectal Cancer Screening Program LHIN Readiness I and II These 3 examples showed us how we could implement IRM. Sharon Zwicker told us: put in quote Marsha Barnes told us: put in quote Gail Paech told us: put in quote Carrie Hayward told us: put in quote Slide 23

24 Risk reporting and communications


26 Key Risk Indicators (KRIs) are linked to strategy, performance and risk
Strategy & objectives Risk Cause Consequence KRI Performance Sandra KRIs need to be linked to strategy, objectives and target performance levels, with a good understanding of the drivers to risk.

27 EXAMPLES OF KRIs Human resource
• Average time to fill vacant positions • Staff absenteeism /sickness rates • Percentage of staff appraisals below “satisfactory” Age demographics of key managers Information Technology • Systems usage versus capacity • Number of system upgrades/ version releases • Number of help desk calls Finance • Daily P&L adjustments (#, amt) • Reporting deadlines missed (#) • Incomplete P&L sign-offs (#, aged) Legal/compliance • Outstanding litigation cases (#, amt) • Compliance investigations (#) • Customer complaints (#) Audit • Outstanding high risk issues (#, aged) • Audit findings (#, severity) • Revised management action target dates (#) Risk management • Management overrides • Limit breaches (#, amt) Sandra

28 Measure and report RM implementation progress
Excellent Advanced capabilities to identify, measure, manage all risk exposures within tolerances Advanced implementation, development and execution of ERM parameters Consistently optimizes risk adjusted returns throughout the organization Strong Clear vision of risk tolerance and overall risk profile Risk control exceeds adequate for most major risks Has robust processes to identify and prepare for emerging risks Incorporates risk management and decision making to optimize risk adjusted returns Adequate Has fully functioning control systems in place for all of their major risks May lack a robust process for identifying and preparing for emerging risks Performing good classical “silo” based risk management Not fully developed process to optimize risk adjusted returns Weak Incomplete control process for one or more major risks Inconsistent or limited capabilities to identify, measure or manage major risk exposures Source: Standard & Poor

29 Progress to Date – ERM Report Card
Quality of Care and Patient Safety Corporate Governance Operation & Business Support Reputation and Public Image Human Resources and Staff Relations Financial Resources Information Systems and Technology Physical Assets Legal and Regulatory Environmental Health and Safety Policies Standards

30 An Approach to Risk Management
Establish centralized support Develop a standardized framework Provide education and coaching Ensure ministry-wide implementation Embed IRM into all major processes including strategic planning and resource allocations decisions Enable our stewardship role

31 The Approach Incorporates risk information into the strategic direction- setting, making decisions that consider established risk tolerance levels. Takes a systems approach to managing risk at the strategic, operational and project levels which is continuous, proactive and systematic. Fosters a working culture that values learning, innovation, responsible risk-taking and continuous improvement.

32 Your toolkit – education, job aids, templates
We wanted to add value not work. We developed forms and templates. So we developed and delivered educational sessions – usually attended by all team members. Included risk 101 and then time for the team members to discuss how to apply concepts to their work. We assisted teams in actual risk assessments. Sometimes we used voting software. We trained the trainer.

33 A Process for Embedding IRM
HAST Sessions Components Participant Outcomes Risk 101 Presentation Introduction – Integrated Risk Management Introduction to basic risk concepts and terminologies Introduction to the MOHLTC’s Integrated Risk Framework Status of IRM in MOHLTC (Most effective when followed-up with facilitated risk assessment workshop or application to actual project) Understanding of risk management process Understanding of how risk management is relevant to their day-to-day work Knowledge of IRM in MOHLTC Management IRM Planning Meeting Planning Discuss best way to implementation IRM in area Proposed IRM implementation plan presented for area Clarify roles & responsibilities for risk management Commitment to IRM implementation in area or stream of work Risk management roles and responsibilities clearly defined Review of IRM roll-out; timelines , deliverables, related forums Commitment to continuous risk communication & learning Risk Assessment Workshop Facilitated Training – Identification of risks & mitigation strategies Identification of objectives Brainstorming and identification of risks to meeting objectives (for project, branch, initiative, etc. ) Identification of source, mitigation strategies, ownership and residual risk for each ‘risk category’ Hands-on experience allowing assimilation of consistent risk management techniques Hands-on practice of IRM process, enabling application of risk management principles and tools to work Greater understanding of work and inter-dependencies Risk Prioritization & Voting Workshop Facilitated Training – Assessment of mitigation strategies & prioritization Review of risks, mitigation strategies and ownership Anonymous voting on the impact and probability of each risk Prioritization of risks on ‘heat map’ Discussion of mitigation strategies for high priority risks Review of risks, mitigation strategies, ownership, residual risk to their work in a seamless manner Unbiased risk prioritization and identification of high risks Enables application of complete risk management process to every day work Risk follow-up Session Monitoring & Review Review of risks six months after initial assessment Review mitigation strategies and residual risks Review of risks and status Continuous improvement





38 The Cyclist and the Risk Manager

39 Interactive Session #2 – 15 minutes
Identify risks that the cyclists faces in cycling to work. Report back.

40 Risk Factors – the cyclist

41 Risk Factors – the weather, the road, visibility, the bike, the lock

42 Risk Factors – the driver

43 Risks Threats: Opportunities: Death Exercise Head Injury Sunlight
Reputation Financial Damage to the bike Sunburn/frost bite Opportunities: Exercise Sunlight Reputation Financial Role model Environment Statistics from Transport Canada Most Canadian deaths were unhelmeted riders. Transport Canada statistics show that 88 per cent of the 80 cyclists who died nationwide in 2001 were not wearing helmets.

44 Mitigation Strategies for threats
Death, head injury, other injury – helmet, bright clothes, lights, bell, CANbike course, obeying traffic laws, positive attitude, anger management course Reputation – great outfit, change of wrinkle-free clothes, shower, time management Financial – high quality locks, “beater”, stopping at stop signs Damage to the bike – regular maintenance, avoiding pot holes Sunburn/frost bite – sunscreen, mittens, hats, token/change Dehydration- filled water bottle Statistics from Transport Canada Most Canadian deaths were unhelmeted riders. Transport Canada statistics show that 88 per cent of the 80 cyclists who died nationwide in 2001 were not wearing helmets.

45 ERM/IRM can be complex and messy

46 Keep it simple

47 Back at the office Why is the organization interested in RM? What are they hoping will be achieved with its implementation? Who is doing what? Roles & responsibilities must be clearly defined. Make sure Leadership supports RM and uses RM results to make decisions. Everyone is a risk manager. Make sure that all risks have owners and the responsibilities for mitigation are assigned How will it be implemented? What is your framework? What is the common language? How will risks be measured and reported? Where will you start? Choices could be where you can most easily succeed or where it is needed the most or where interest is high. When will it be implemented? It is a journey not a destination; 3-5 years for complete roll-out; how often will risks be assessed; when will mitigation plans be implemented and monitored; when will risks be reported.

48 Ask questions and develop your approach
Do we understand our major risks? Do we know what is causing our risks to increase, decrease or stay the same? Have we assessed the likelihood and impact of our risks? Have we identified the sources and causes of our risks? How well are we managing our risks? Are we trying to prevent the downside risks from happening? Or are we trying to simply recover from them? Who is accountable for these risks? How do we talk about risk? Do we have a common language across branches, across divisions, across the ministry, across the OPS, across the health care system? Are we taking too much risk? Or not enough risk? Are the right people taking the right risks at the right time? What’s our culture? Are we risk adverse or are we risk-takers? Or are we somewhere in between?


50 Questions?

51 The case - You are responsible for Risk Management for:
Case 1 – The Pan Am Games 2015 Case 2 – The provincial response to the next Pandemic Case 3 – The extension of Hwy 404 Case 4 – The rescue efforts in Haiti Case 5 – Human Resources in the Ontario Public Services Case 6 – A big teaching hospital in Toronto

52 The case Consider the 13 categories of risk
Identify top 5 threats (downside) and top 5opportunities (upside) Propose mitigation strategies Discuss how the following risk factors would affect your assessment: Economy Demographics Weather Technology Timing of events such an election Others

53 Questions?

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