Illinois Risk Management - Essay Example

Illinois Risk Management School Affiliation: Risk management plays an integral role in any business as it foresees the likely future and helps in preparing for the risks or opportunities. Even though the components of a good risk management program might be uniform for all businesses, the risks and threats faced by various businesses vary. It is likely to find one institution facing a certain risk, which is not a bother to another. Chicago State University and the Government of Illinois share some of the risks faced, but there will still be a variance in both the risks faced and the approach employed. This paper has addressed these similarities as well as the differences. In its findings, it was established that the University has a different approach when it comes to the amount of risks it can handle from that of the Illinois government. Overall, one will realize that there are more similarities than differences in these two mainly because they both have people to care for and guarantee both safety and security. The business world is one that is more dependent on a businessperson’s level of knowledge coupled with their ability or willingness to apply it. Because of the unpredictability rife in almost every business, there are several measures taken to either eliminate any risk or mitigate them where they become inevitable. A Risk Management (RM) program is vital for corporate and other institutions to speculate and subsequently plan for the ever-present risks. Often, an institution might still incur losses if the RM program was not properly organized or if there is no clear continuity plan. Because the risks vary with institutions, the RM programs tend to differ. In this paper, a comparison of Illinois and Chicago State University’s RM programs has been done. Background Chicago State University (CSU) is a learning institution based in Chicago in the state of Illinois that offers several courses to students from all backgrounds. Its major risks include fire, natural calamities, and theft of vital learning equipment and injuries that might occur to students. On the other hand, the government of Illinois (GI) is tasked with providing crucial services to the state’s residents. This onus comes with ensuring that some incidents likely to cause loss of properties or lives are well mitigated. In short, both the CSU and GI have a somewhat similar duty. Both have people to whom security and safety has to be assured. The following section will compare and contrast the two institutions concerning the RM. Worth noting, every RM program foresees risks faced by a firm or an institution, determine the likelihood of the occurrence followed by the estimation of the impact the risks will have and finally plan how the risks will be avoided, transferred or accepted. CSU versus GI: Identification of risks While these two institutions vary in the services they offer, there are similarities in the sense that both have people under them who require some vital services. That would mean that though the risks might not precisely be the same, the challenges are somewhat similar. For CSU, one of the risks it faces is ensuring that the students are safe in the learning compounds. This means investing in secure classrooms and all other necessary areas. Safety is another concern that CSU addresses in order to guarantee the students’ learning atmosphere. Similarly, the GI has a burden of offering secure and safe environment to all the residents of Illinois. Other risks faced by the two institutions include cases of fraud, inefficiency in operations, errors and non-compliance. As is the case with every RM program, the first step is identifying the risks that an institution faces. When it comes to the identification of risks, it was noted that the two institutions employ similar approaches. The GI encourages the residents to offer recommendations on the areas to improve the services; similarly, the CSU works closely with students in identifying the risks. The GI often engages the residents in receiving the opinions on the areas that require change, as does the CSU. However, this does not mean the two institutions rely primarily on the residents and students. Rather, other methods such as creating a department tasked solely for that purpose and having a continuity plan are employed. While the above methods characterize the process of risk identification in the two institutions, there is a variance in as far as frequency is concerned. While GI focuses on the RM program often, the CSU’s team takes it as a day-to-day affair mainly because of the ever-rising unseen dangers. For instance, there are risks that were never thought to be faced by learning institutions. A case in point entails security where shooting incidents have increased in the recent years across the US. While it is a threat, that even GI faces, it has not been seen as pernicious to learning institutions but the recent cases have seen a change in handling the same. To GI, this is an issue almost likely to happen meaning there are always measures to counter it in case it occurred. Conversely, the CSU faces the myriad challenges of resources to repulse such likelihood as well as the number of people to protect. This is just one case that CSU faces, but the internal audit team has to consistently delve into looking for the issues that pose a threat to the organization. As for CSU, its RM team employs three approaches including the System Development Review (SDR). In this approach, the aim is to ensure that all the cost-effective controls are in place to stop the risk of losing money or resources (CSU, 2015). While the GI has a something close to this one, the CSU’s is analyzed on regular basis, unlike the GI’s, which is occasional. The second approach that the CSU’s internal audit team employs is the Business Process Improvement (BPI), which allows the team to initiate processes that help in the improvement of business systems. The BPI is applied by the team in the identification of control deficiencies in the institution after which there is designation of measures to control the deficiencies. As a result, optimal performance is evident where this team is effective in this approach (CSU, 2015). Even though the GI has a RM department tasked with almost a similar duty, the implementation follows a more rigorous process than the CSU’s. Normally, this is a result of the bureaucratic requirements in the two institutions where CSU’s is not as complex as the GI’s. Thirdly, Internal Control Education (ICE) is a common practice in the CSU’s team where training sessions are offered in a bid to reduce risks as well and offer the much-needed control awareness to the internal members. Consequently, this helps as many staff in the institutions as possible, and this significantly reduces the impact of risks. In fact, in some cases the risks could be avoided altogether since the members concerned are aware of the sources of the risks (CSU, 2015). This trend is not present in the GI where the main goal of the RM department is to identify the risks and offer the necessary plans on how the risks will be curbed. In essence, the CSU’s RM department goes beyond identifying, assessing and eliminating the risks; opportunities are seized for enhanced efficiency. Risk mitigation As indicated earlier, some risks can only be mitigated since their occurrence is sometimes inevitable. In the case of GI, risk mitigation is done in a number of ways including provision of policies. The government has a department that handles all cases of compensation by the workers where injuries emanating from the workplace are well handled (CMS, 2015). For the same reason, the CSU has a department called Internal Audit whose primary roles include the identification, assessment and mitigation of the risks the CSU faces. In addition, the department looks further into the opportunities that could benefit the institution, as is often the case with every good RM. While an RM program is often thought as one that analyses and plans for the risks an institution faces, it also tends to identify some of the opportunities likely to benefit an organization (Lo & Chen, 2012). Notwithstanding this similarity, a variance was observed when it comes to the risks that are mitigated. First, the GI does not need to take liability for all the injury cases that might befall ach of the residents of Illinois. In contrast, the CSU has a responsibility of ensuring the students are safe meaning that the food consumed and other amenities have to be tested. In a bid to limit the risks that might catalyzed by these sources, the university takes ample time to educate the respective departments on how to reduce such cases. Even though this trend is replicated at GI, it is only for the staff not the entire public. The burden facing the CSU is not compared to the GI’s because of the number of people as well as the level of attention the former’s staff and student require. That does not mean that the GI has no responsibility whatsoever on the part of ensuring safety and security among other things to the public. In fact, the government is expected to offer various services to its citizens, failure to which suits could be filed in court of law. With full understanding of this risk, the government mitigates the risks by ensuring the systems are working in a way to deliver efficiently in case a demand arises. Therefore, the CSU’s responsibility concerning protecting the population is larger than the GI’s in certain areas. As a result, different tactics are employed though there are similarities in some of the areas requiring the attention. Risk avoidance Another similarity existing between these two include approach of the risks, which can be avoided. For instance, the GI does not directly pay for the claims made by the workers in cases of injuries. Instead, a policy has been purchased to ensure the government is not distracted by lawsuits. Similarly, the CSU has a similar policy though theirs is not limited to some extent. In RM, a risk can be avoided if there are measures taken one of which is the inclusion of that policy that caters for the liabilities that a firm might face. Risk avoidance is further achieved by ensuring that all the systems are working properly, the employees handling the systems are well-trained and regular maintenance. As reported earlier, the CSU has a team that audits almost every department within the institution to ensure efficiency and productivity remain uncompromised. Almost every staff and students at CSU are properly trained on a number of issues including handling electricity related tasks. Other departments have to report to the audit team of any sign of an error from the system. Upon receiving this information, the team takes necessary steps to ensure the issue is addressed promptly and conclusively. Furthermore, analysis on all the vital systems is carried out often to make sure errors, which could be detrimental to the institutions, are corrected before they negatively influence the learning center. Risk appetite Every organization has goals and objectives it strives to achieve, but some risks act as hurdles to the realization of these objectives. While some risks can be avoided or transferred, others can be absorbed by an organization especially when their acceptance offers greater returns. There are more differences than similarities between the institutions when it comes to this part. According to Felton (2010), there are at least five types of risk appetite including Averse, Open, Minimal, Cautious and Hungry. An organization that employs the Minimal approach does not engage in high-risk activities no matter the likely reward. An Open appetite considers the options and takes the risk if the action will have a better value for the money. Averse avoids risks whenever possible while the Cautious, as the name depicts, treads carefully considering every option with the safer ones seized more regardless of likely benefits. The Hungry appetite chooses to innovate so long as the returns are handsome notwithstanding the risks. In comparison, the CSU has a Cautious appetite where all options are considered with the safer options preferred over the others. In addition, there is a tendency for taking an Open approach when the opportunity exists. In contrast, the GI has a Hungry as the predominant appetite for its services as evidenced by some of the ventures undertaken from time to time. In conclusion, the Government of Illinois has a RM program, as is CSU with each trying to predict the risks and prepare for the unavoidable ones. Each has a department that focuses on addressing these risks where the primary objective is to ensure the respective interests are protected. Both institutions have employed risk avoidance and risk control as the major ways of handling the inevitable threats. Nonetheless, the approaches applied differ in a number of ways as explained above with CSU preferring to engage the other staff to GI. Also, both have different risk appetite with GI being an institution with a stronger appetite than the CSU. References Chicago State University (2015). The Role of Internal Audit | Internal Audit | Chicago State University. Chicago State University. Retrieved 14 May 2015, from https://www.csu.edu/internalaudit/internalauditrole.htm CMS - State Employee Services,. (2015). Risk management. Retrieved 14 May 2015, from http://www.state.il.us/cms/2_servicese_ben/riskmgt.htm Felton, K. (2010). Understanding the connection between risk appetite and risk analytics. Journal of Healthcare Risk Management, 30(1), 29-30 Lo, C., & Chen, W. (2012). A hybrid information security risk assessment procedure considering interdependences between controls. Expert Systems With Applications, 39(1), 247-248. Read More