Risk Management for Klower Foundation Sydney - Case Study Example

Running header: Risk Management plan Student’s name: Instructor’s name: Subject code: Date of submission Risk Management plan for Klower Foundation Sydney Introduction, Klower foundation is a non governmental organization involved in charity works not only in Sidney where it has its headquarters but also in other states and countries. The foundation has millions of dollar programs and activities under its management at any given time. Our activities mainly involve peace, stability and poverty eradication in high risk environments. As such, the way we conduct this activities significantly affects not only our reputation but also that of Australia and national interests. As such, risk management forms an integral part of the accountability requirements in all our activities. The establishment of a risk management plan is seen as a safeguard to our interests while ensuring efficient use of resources. Klower Foundation recognizes risk management as a core part of good corporate governance practices and a vital tool in strategic and operational planning with numerous benefits in terms of changing the operating environment of our core business. This is the reason behind the development of this risk management plan. Communication and consultation The Australian standard for risk management considers communication and consultation as vital considerations at every step of risk management process. As such, our communication and consultation activities will involve dialogue with stakeholders aimed at consultation as opposed to one way flow of information at all levels. This will involve development of a communication plan for both external and internal stakeholders at the initial stage of the risk management process. The consultations will address issues regarding the risks themselves as well as the risk management process. Various consultative forums will be held with the stakeholders in a bid to ensure those responsible for the plan’s implementation as well as those with vested interests understand the decision making basis and why certain activities will be necessary for risk management. This will help ensure that stakeholders make informed decisions and judgments about risks not based on their personal judgments and perceptions. This is because their views will have significant impact on decisions made and hence their perceptions of risk need to be identified. Consequently, the following have been identified as responsible for implementation of this plan. a) Director General and senior management staff-responsible for implementing and maintaining sound risk management throughout Klower foundation. b) Audit committee-responsible for oversight provision and provision of corporate assurance on the adequacy of risk management procedures within Klower. c) Branch heads-ensuring appropriate risk management procedures and policies are adhered to within their units d) Senior Klower personnel abroad ensure assessment of major risks are completed and given to audit section. e) Country program managers- ensure appropriate risk management procedures and policies are in place within their program. The Risk Management Plan Risk context This section establishes the basic parameters within which risk will be managed and also sets scope for the entire risk management process. As such, the context will include Klower foundation’s external and internal environment as well as the interface between the internal and external environment. The external context for Klower includes the social, regulatory, cultural, political and financial environment, external stakeholders as well as key business drivers. On the other hand, our internal context will include our organizational culture, internal stakeholders, capabilities and resources such as people and processes as well as our goals and objectives and the strategies put in place to achieve them. This implies that different circumstances will call for different activities and hence personnel need to consider internal and external environments associated with their areas of work while implementing this risk management plan. Risk identification The risk identification process will involve the risk management team to be appointed by the management and other appropriate stakeholders and will involve evaluation of both internal and external environmental factors to come up with potential risks that the Foundation might be exposed to. The methods to be used in aiding identification of risks associated with Klower foundation include brainstorming sessions, interviews as well as conducting a SWOT analysis of the organization. The process of risk identification will involve all concerned stakeholders in a bid to make them own the process so as to ensure the success of the plan. Having identified the potential risks, a risk management log is to be generated and electronically stored so that it can be regularly updated as need be. The table below shows some potential risks for Klower foundation Risk to effective aid outcomes Coordination/ strategy Local macro factors Factors involving program quality Activity/program design Sustainability factors Risk to goodwill/reputation National interest factors International reputation Support in Australia Government support Risk to efficiency activity performance /value for money contractual arrangements external barriers procurement Capability risk Management of resources Organizational hazards Information/ systems As can be seen, possible risks fall in broad areas. As such, the personnel will be responsible for management of risks relating to their respective areas of work whether at home or abroad so as to ensure achievement of best possible outcomes. Risk analysis and prioritization This will entail risk evaluation to determine risk events, assign likelihood and consequences of each risk event, creation of risk index. Both internal and external environment and stakeholders will undergo risk analysis. Note that risk consequences could be to specific work responsibilities and outcomes for Klower foundation. Risk could be to the aims of particular management operations, to individual activities objectives, particular strategies etc. Consideration of risk likelihood will enable us rate the risks in order to determine the best method of handling the risk by prioritizing resources to risk elements considered most significant. The following matrix and terminology will be useful to Klower foundation’s personnel in analyzing and prioritizing risks. Risk analysis will be conducted on inherent risks, residual risks and on the level of risk after application of proposed risk controls. Consequences Likelihood Negligible (1) Minor (2) Moderate(3) Major (4) Severe (5) Almost certain (5) Medium High high Very High Very High Likely (4) Medium High High High Very High Possible (3) Low High High High High Unlikely (2) Low low medium Medium High Rare (1) Low low medium medium High Risk level analysis a) Very high-this level of risk would curtail the achievement of objectives result in unacceptable cost overruns and needs close executive attention. b) High –this level can result in substantial delays in project schedules and significant impact on cost and technical performance and will need close management attention. c) Medium- this calls for identification and control of contributing factors through monitoring conditions and reassessing project milestones. d) Low- this level calls for normal control and monitoring measures. Klower’s personnel will need to bear in mind the information needs that underpin risk management. Such mechanisms to inform identification of activity risks include quality assurance reviews, monitoring reviews, midterm activity reviews among others. Klower will also use quantitative and semi-quantitative ways in analyzing risk likelihood and consequences. Internal and external auditors will carryout spot checks to gather information on likelihood of non adherence to Klower’s contractual requirements. Fraud incident reporting will also inform judgments on likelihood of fraud risk and its valuation in dollars will provide guidance on its consequences. Risk Resolution Different risk resolution techniques will be adopted for different level and types of risks. The following options have been identified by Klower as far as feasibility and cost effectiveness of risk resolution strategies are concerned. a) Risk acceptance- where risk levels will be deemed insufficient to justify incurring cost or effort or where it’s deemed uneconomical to resolve residual risk, we will adopt a risk acceptance approach. We accept that it’s impossible and cost effective for all risks relating to the management of the aid program to be eliminated. b) Risk avoidance- this approach will be adopted where risk levels are unacceptable and control means is not viable or worthwhile. This will be done by failing to proceed with activities generating the risk. However, this will be carefully done to avoid significant cost penalties decreased efficiency and ensure achievement of intended outcomes. c) Risk reduction –this will be done through implementation of preventive strategies through training and education. d) Mitigation of impact- consequences of risk will be reduced through efforts aimed at ameliorating and dealing with risk impacts such as public communication strategies and contingency planning. e) Risk transfer- this will entail allocating risks to parties best able to handle them. Klower will do this by contracting with third parties. Risk sharing As a funding agency, Klower works with partner governments, outside contractors as well as Australian governmental agencies in delivering its aid program. As such, its aid program can be exposed to risks arising from; i) Factors under Klower Foundation’s control for instance program management, budgetary allocations, internal management systems etc. ii) Factors under the control of contractors e.g. project delivery methods and personnel engaged. iii) Factors inherent in the contractual relationship for instance contract terms and conditions iv) Factors resulting from inaction or action of beneficiary organizations, partner governments and aid delivery organizations. v) Factors beyond Klower’s control or external stakeholders control such as conflict and natural disasters. As such, appropriate sharing of risk will entail both Klower and the contractors or governmental agency assessing risks in aid provision and accept responsibility for risks which each party ought to manage depending on a party’s ability to control risk more effectively. Risk beyond control of either party will be shared in an agreed upon manner and parties compensated financially for carrying risk. In addition, risk will be handled depending on the assessed risk level where low risks could be accepted but with monitoring and control measure being put in place. Medium level risks will require treatment and monitoring while specifying personnel with responsibility for this as well as timeframe for action and reporting being specified. High and very high level risks will call for executive action including preparation and approval of risk treatment plan in a bid to achieve acceptable levels of risk exposure. Risk Monitoring Risk monitoring will entail learning lessons from risk management process through review of events, treatment plans as well as their outcomes. As such, there will be need to record each stage of risk management process appropriately. The timing and extent of documentation requirements will be determined by accountability and communication needs. Management of risk will be recorded according to the requirement of Klower’s risk management procedures and guidelines as constituent of management planning and reporting. Appropriate documentation of every risk management practice will be carried out so that risk management process at Klower holds up to both external and internal scrutiny. The documentation of risk management process will also benefit Klower personnel and will aid in risk monitoring. Senior managers will be responsible for ensuring implementation of risk management practices in their respective areas of operation and ensure proper communication of the standards and practices to personnel. The overall responsibility for oversight and provision of corporate assurance on the risk management procedures adequacy across Klower will be left to the audit committee supported by the audit section. However, Klower personnel have the responsibility for risk management practices within their respective areas of work. The risk management schedule The following is the risk management schedule together with the estimated timing. Activity By when? Frequency of update Outcome expected Risk identification -Assessment of project teams -Expert interviews -Lessons learnt 1/12/2012 1/12/2012 1/12/2012 Quarterly N/A Quarterly Risk identified/ mitigation database Risk identified/ mitigation database Risk identified/ mitigation database Risk Analysis -Decision analysis -Probabilistic network schedules -Probabilistic cost and effectiveness models N/A N/A Reports as required Risk mitigation -milestones Contingency planning 1/12/2012 1/12/2012 Quarterly Quarterly Risk identification/mitigation database Risk identification/ mitigation database Risk register In the risk register, we record the risk identified by Klower foundation risk management team together with information pertaining to each risk and the counter measures to be undertaken. priority title description Probability of impact schedule scope quality cost Action 1 Procurement process Procurement process properly approved and transparent- failure to lead to bad reputation and loss of funding 100% high high high high The current procurement procedures noted to have loopholes that can give room for fraud. -a mitigation strategy to involve redesign and more tight procedures put in place 2 funding There is probability of losing funding due to delays caused by procurement procedures and processes 95% high high high high -need to prioritize most sensitive projects in fund allocation. - Procurement procedures to be reviewed to reduce delays while funds requisition time to be reduced. 3 Governance definition not complete Confusion between participants of roles and decision making organs 85% medium medium low Medium -Clear guidance and instructions to be issued at all times. -clear communication mechanisms to be put in place to allow flow of information in all directions. 4. Personnel Availability of personnel with the right skills and knowledge at all times 75% High Medium Medium High Recruitment process to be aligned to our organizational needs. -Human resources department to be better equipped to ensure recruitment is properly done. References: Hubbard, D2009, Risk management: Principles and guidelines for implementation, Englewood Cliffs, Prentice Hall. Read More