Risk Considered by Derbyshire Fire & Rescue Service - Case Study Example

Content Introduction 2 Operational Boundary 2 Fire & Rescue Service Consideration 3 Calculation of Safety Margin 4 Characteristics of Fire & Rescue Service 6 Risk 7 Risk Considered by Derbyshire Fire & Rescue Service 9 Opinion 12 Conclusion 12 References 13 Introduction Every organization pays stress on finance. They need to manage it properly. This will help in proper planning. Execution of strategy will be sound. It will ensure that “there is steady inflow and outflow of funds so that decisions made are sounder and management is better”. (James, 2005) Money is a requirement. Fire and service rescue team needs to ensure it. This will help them. It will provide the necessary equipments. Derbyshire fire and rescue services have used their finances well. They have ensured that they work within the boundary. This has given them additional funds which can be used for contingencies. Even disclosing the transaction has ensured there is transparency. This has resulted in winning human confidence. Derbyshire fire and rescue services have also complied with the laws. They have ensured that all the risk has been taken care of. Due to this Derbyshire fire and rescue services has been able to procure better equipments. Even their ongoing projects have been such which has integrated all this factors. This has directly affected Derbyshire fire and rescue services as it has reduced the casualties due to the new techniques used. This has thus, seen that financial management helps Derbyshire fire and rescue services move towards better management. Operational Boundary It is a type of budget. Organizations need to work within it. It is “calculated and ascertained after taking into consideration the inflows and outflows so that the limit is known under which the company will operate”. (Gregory, 2005) This will provide a limit. It is calculated as follows Calculating the maturity loans + the loans which will be replaced by payment and new taken + the fund for capital usage + the revenue balance which is (earned-spend) + the financing required for capital investment + the statutory and voluntary requirements While deciding it the authorised limit is set. This is set above the operational boundary. This will ensure that “in case the expenditure as budgeted goes out than still the department is able to meet for the contingency so that the operation continues without any hiccups”. (Williams, 2003) This improves performance. The fire and rescue service has set it 5% above the limit. This is done so that the contingencies are met. Fire and Rescue Service Consideration The fire and rescue services look into various things. This helps them build strategies. It makes them realize ways that will reduce casualties. This are generalised factors. It is important that fire departments follow this. This will ensure that incidents are controlled easily. The factors which are considered are as follows Safety at work: This is the main consideration. “Fire and rescue services see that the fire fighters are safety while performing their duties and also look into the fact that the casualties are less”. (George, 2009) Derbyshire fire and rescue services look into it. They have ensured it for all projects. Necessary changes are also accounted. This has ensured safety. Setting the authorised limit: It is important that this is done well. “It will ensure that they are able to get all their projects on time and the necessary funds are available for it so that the process continues”. (George, 2009) Derbyshire fire and rescue services look into it. This has allowed them to “have the strategic and operational matters more clearly defined so that the decisions are better”. “Complying with the rules and code practices”. (George, 2009) Derbyshire fire and rescue services look into it. This is seen by the governance agreement. This has ensured transparency. Change in interest rate: It is important that the “changes in the fixed and variable interest rate is accounted for because a change in these interest rate can bring about a change in the estimated expenses so to reduce the chances of an credit crunch it needs to be accounted for”. (George, 2009) The extent to which Derbyshire fire and rescue services consider is not known. Equipment needs: This is important. “It will ensure that service is delivered timely and consideration is given on modern techniques so that time is saved and casualties are reduced”. (George, 2009) Derbyshire fire and rescue services look into it. It is seen by the fact that “Derbyshire fire and rescue services has many service delivery plans in place which will facilitated the projects and ensure rolling out of equipments”. (Statement of accounts, 2008-09) Thus, we see that Derbyshire fire and rescue services has accounted for the major considerations. This has made it easier for them. Strategies have been better rolled out. Calculation of Safety Margin Safety Margin for 2008 Operational Boundary = 11.698 million Authorised Limit = 12.5 million Proportion of authorised limit = 11.698 / 12.5 = .935 So, safety margin = 100 – 93.5 = 6.5% Thus for the year 2008 Derbyshire Fire and Rescue Service operates within the safety margin. Safety Margin for 2009 Operational Boundary = 14.157 million Authorised Limit = 15 million Proportion of authorised limit = 14.157 / 15 = .9438 So, safety margin = 100 – 94.38 = 5.62% Thus for the year 2008 Derbyshire Fire and Rescue Service operates within the safety margin Safety Margin for 2010 Operational Boundary = 16.419 million Authorised Limit = 17.5 million Proportion of authorised limit = 16.419 / 17.5 = .9382 So, safety margin = 100 – 93.82 = 6.18% Thus for the year 2008 Derbyshire Fire and Rescue Service operates within the safety margin Thus, for all the years Derbyshire operates within the limit. It means that Derbyshire fire and rescue service has as authorised limit more than needed. This state’s it will be able to meet contingencies. Derbyshire fire and rescue is efficient in forecasting. This has ensured proper management. Characteristics of Fire and Rescue Services The Fire and Service rescue ensure that certain characteristics are maintained. The department looks after the urban, rural and mixed. It doesn’t differentiate on the basis of this. Derbyshire Fire and Rescue services also adhere to it. Those characteristics are Have “a system in place which looks at delivery, scrutiny and review of priorities and diversity”. (Nathan, 2004) Derbyshire has made arrangements for this operation. A change here is reflected by change in corporate governance. All “data on services are accessed with standards” (Nathan, 2004). This has allowed Derbyshire have a control on over projects. This has improved operations. Having “equality between rural and urban population” (Nathan, 2004) while imparting service ensures that services matches. This is evident due to “the interdependence between the boards but that needs to be considered as there is a lag in between them” (Annual Statement, 2008-09) Thus, Derbyshire adheres to most characteristics. There are certain areas where they need to work. This will improve services. Risk Risk is involved everywhere. Risk can be defined as “the process of defining and analyzing the dangers which an individual, business and government agencies poses and the potential and natural hazards that can be caused”. (Watts, 2009) The risk fire and rescue services are similar to other business. The risks faced are as follows Financial Risk: It is defined as “the risk associated with the company due to the fact that it is not able to meet its financial obligation”. (Green, 2007) This risk affected the decision. Organisations need to check it. This can be achieved by Net Value Method. This will help to “calculate the present value of the future earning that can be applicable to the shareholders”. This will also show yearly flows. Thus, decision can be better. Fire and rescue services have to consider it. They need to see that the projects account for it. Using, NPV will help. Even proper budgeting will help. This will help to see funds are safe. Shortage will be reduced. Economic Risk: It is “the risk that the project’s output will not be saleable at a price that will cover the project operating and maintenance cost and debt service requirements”. (Little, 2009) Thus, it states that “the danger that economy can turn against investment” (Little, 2009). Fire and rescue service needs to watch it. This risk can be reduced by making proper predictions. Also looking at “fixed and variable interest rate” will help. Business Risk: It is the “risk that the company will not have adequate cash flows to meet its operating expenses”. (Rath, 2009) Companies need to reduce it. This can be done through “effective risk management techniques with focus on health and safety, food safety and information security”. (Rath, 2009) The effects can also be measured. This can be managed by “calculating the various ratios which help to manage cash, having proper debt financing options and insuring against the various risk involved”. (Filisko, 2009) This will help to reduce the effect. Political Risk: It is the “risk of losing money due to changes that occur in the country’s government and regulatory environment”. (Christy, 2009) These are sudden changes. It is difficult to account for. Certain situation result this to happen. This is why FRS has an authorised capital. It will help to meet contingencies. It will ensure that things are performed better. Physical Risk: It is the “risk that fire service tender man are their life which they might lose while rendering service so they need to be careful and see that proper precautionary measures for safety are in ace so that physical life doesn’t get hampered”. (Gregory, 2005) This risk can be reduced be ensuring proper equipments. Even new technology will help. FRS needs to ensure that their projects are in line with this. Environment Risk: This is the most watched topic. FRS needs to preserve environment. This will help to bring safety. FRS faces this. They need to perform their duties seeing that environment is not hampered. They need to ensure safety. Like, forest fire affects environment. FRS takes measure to bring this risk under control. Thus, these are the risks which are there for FRS. This can be reduced. Risk Considered by Derbyshire Fire and Rescue Service Derbyshire Fire and Rescue Service have considered many risks. This has helped as by doing so the department was able to come up with service. The risk which Derbyshire Fire and Rescue Service has looked into is as follows Reserves: Derbyshire Fire and Rescue Service have a general reserve of 2 million pound. This will help Derbyshire Fire and Rescue Service “to meet the political risk arising from government modernization programme”. (Statement of account, 2008-09) Derbyshire Fire and Rescue Service also have a strategic reserve. It will help to meet “corporate risk and business risk encompassing issues such as staffing, legal challenges, and technology and asset management”. (Statement of account, 2008-09) Working Capital Risk: Derbyshire Fire and Rescue Service have 5.9 million pounds as short term investment. This will “meet the day to day working capital risk and allow for better performance and execution of strategies”. (Statement of account, 2008-09) Physical risk: Derbyshire Fire and Rescue Service have 223.1 million in pension fund. This will reduce physical risk. “It will provide them the ability to ensure that the safety is looked at even during the tenure of service and after that retirement by receiving regular income”. (Statement of Account, 2008-09) Economic Risk: With recession engulfing the entire globe this risk is huge. Derbyshire Fire and Rescue Service have taken measures have been taken to tackle it. Meeting have been held for it. It has been seen that this doesn’t affect their services. They have worked to tackle it. This has resulted in good service. Governance: The governance for Derbyshire Fire and Rescue Service is sound. They have ensured transparency. This has made it possible to get good result. This has ensured that Derbyshire Fire and Rescue Service work within the budgets. This has ensured that people have confidence. This is shaping in a good way. Credit Risk: Derbyshire Fire and Rescue Service have limited it. This is done by “taking the form of a bank not repaying the deposits or the interest or a default on the loan that might arise”. (Statement of account, 2008-09) This is done through Treasury Council. Investment Risk: Derbyshire Fire and Rescue Service have invested 6.7 million pounds on “banks and financial investment”. “This investment consists of short term investment and Derbyshire Fire and Rescue Service has been able to see that it doesn’t arise and has not happened till now”. (Statement of account, 2008-09) Liquidity Risk: Derbyshire Fire and Rescue Service have reduced it. This is done by planning. They have done it by seeing that “investment considers both the fixed and fluctuating interest rates and it has further been divided according to the years so that using NPV better value can be ascertained so that the chances of being illiquid is less”. (Statement of account, 2008-09) Derbyshire Fire and Rescue Service have also ensured that “borrowings are not carried at fair value, so nominal gains or a loss on fixed rate borrowing does not impact the income and expenditure”. (Statement of account, 2008-09) This has ensured safety. Contingent Liabilities: Derbyshire Fire and Rescue Service have not recognised any. This will increase risk. It will result that contingencies are not controlled. This will create pressure. Price Risk: Derbyshire Fire and Rescue Service have managed it well. “Not investing in equity shares have ensured that the fluctuation of the capital is reduced and since their task is to render service it is done without any failure”. (Statement of account, 2008-09) Strategic Risk: Derbyshire Fire and Rescue Service have this risk. It has various projects. Not able to deliver proper strategy will be reflected. It will result in loss. It will affect the growth. Even getting equipments will be tough. This will also make it tough for Derbyshire Fire and Rescue Service to get funds. Legal Risk: Derbyshire Fire and Rescue Service have looked after this. “They have adhered to the Fire and Rescue service Act, 2004 with other enactments thus complying with all the formalities and rules of the government”. (Statement of Account, 2008-09) Health & Safety Risk: Derbyshire Fire and Rescue Service have ensured it. They have proper equipments. Using the latest technology has helped. They have been able to see that safety is first priority. Having insurance back up has helped. This has ensured safety for families. Asset Management Risk: Derbyshire Fire and Rescue Service have not disclosed it. The risk associated with them is uncertain. Even the projects don’t disclose it. It is an area to work on for Derbyshire Fire and Rescue Service. Opinion On the basis of the entire framework followed by Derbyshire fire and rescue services I feel that they are working on every quarter. They have ensured that the funds have been directed in the correct path and proper management has been the key. Even the strategies have been sound due to the fact that they are operating within the operational boundary. Derbyshire fire and rescue services have also ensured that they have some funds for contingencies. Derbyshire fire and rescue services have considered the risk which highlights the fact that they are looking into things from every angle. I feel that they need to work on the asset management risk as it forms a vital part. They have also ensured that they keep up with latest developments. This has allowed them to have latest technology in place due to which casualties have reduced and faster services have been possible. Thus, the overall performance is satisfactory. Conclusion Derbyshire Fire and Rescue Service have ensured this. This has been due to proper financial management. It has helped them decide on the expenses. Budgeting has been possible. It has ensured that best equipments are available. It has ensured that planning is better. It has also ensured safety margins, thus we see that all risk has been cared for. It has also been disclosed. This has helped to bring good service. Thus, Derbyshire Fire and Rescue Service have been able to disclose all this. This has made them provide good service and safety. 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