Tag Archives: #risk management

How to manage risks in your organization.

In order to determine the degree of risk, you apply the formula:

Risk = Likelihood of something happening × Impact.

  • Each risk then needs to be quantified.
  • Managing the risk then involves selecting tools from the risk management armoury to prevent or minimise the risk by reducing the likelihood of it happening or it’s impact.
  • Insurance is one tool to reduce the impact of a risk.You can always explore from those offered by different insurance service providers and choose the package that most minimises the risk.
  • Another option is to accept the risk.This decision should be taken after careful assessment of the risk and the possible consequences of accepting it.
  • Although risk management is a responsibility of the Board,every organization should appoint a risk officer to take the lead in risk management.The risk officer should be responsible for preparing and updating a risk register.
  • The risk register will form the basis of the risk management strategy that is necessary for good governance.

A sample risk register

RiskLikelihood of riskPotential impactControl procedureMonitoring processOwnershipFurther actionDate of review
Reduction in funding from government.LowHighSetting and achieving required performance.Using performance indicators.You,BoardReport on performance to the Board every month.Every 3 months
Risk register
Finding out risks

Ways of reducing the risks that affect an organization

  • Having a risk management process to avoid some risks and to manage others properly.
  • Change the way the organization is governed to mitigate potential risks.When an organization is governed in a transparent and accountable way,many risks associated with public image, funding and stakeholder satisfaction can be avoided.
  • Change the strategic direction of the organization if necessary.
  • Reduce or expand services and change the way of operating to reduce risks e.g introducing the evaluation and control procedures can assist greatly with the management risk.
  • If there are significant risks facing the organization,it may be possible to take out insurance to cover the risk.For example insuring the officials and athletes in a sports organization against injury.

As with governance,the process of risk management should be transparent and communicated throughout the organization.The annual report should include an acknowledgement of the Board responsibilities,the process followed and a confirmation of the systems in place to control areas of major risk.In this we all stakeholders become comfortable with risk management of the organization.

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How to manage risks in your organization.

In order to determine the degree of risk, you apply the formula:

Risk = Likelihood of something happening × Impact.

  • Each risk then needs to be quantified.
  • Managing the risk then involves selecting tools from the risk management armoury to prevent or minimise the risk by reducing the likelihood of it happening or it’s impact.
  • Insurance is one tool to reduce the impact of a risk.You can always explore from those offered by different insurance service providers and choose the package that most minimises the risk.
  • Another option is to accept the risk.This decision should be taken after careful assessment of the risk and the possible consequences of accepting it.
  • Although risk management is a responsibility of the Board,every organization should appoint a risk officer to take the lead in risk management.The risk officer should be responsible for preparing and updating a risk register.
  • The risk register will form the basis of the risk management strategy that is necessary for good governance.

A sample risk register

RiskLikelihood of riskPotential impactControl procedureMonitoring processOwnershipFurther actionDate of review
Reduction in funding from government.LowHighSetting and achieving required performance.Using performance indicators.You,BoardReport on performance to the Board every month.Every 3 months
Risk register
Finding out risks

Ways of reducing the risks that affect an organization

  • Having a risk management process to avoid some risks and to manage others properly.
  • Change the way the organization is governed to mitigate potential risks.When an organization is governed in a transparent and accountable way,many risks associated with public image, funding and stakeholder satisfaction can be avoided.
  • Change the strategic direction of the organization if necessary.
  • Reduce or expand services and change the way of operating to reduce risks e.g introducing the evaluation and control procedures can assist greatly with the management risk.
  • If there are significant risks facing the organization,it may be possible to take out insurance to cover the risk.For example insuring the officials and athletes in a sports organization against injury.

As with governance,the process of risk management should be transparent and communicated throughout the organization.The annual report should include an acknowledgement of the Board responsibilities,the process followed and a confirmation of the systems in place to control areas of major risk.In this we all stakeholders become comfortable with risk management of the organization.

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How to assess risks facing an organization

Although each organization is unique, certain risks are common to most organizations.

A training on startups

You should consider the following when assessing risks:

  • Efffectivenesss of the board – since the board provides strategic direction for the organization and is the final arbitrator on what your organization does, it is important that it should operate effectively.Ask yourself the following questions;Does the board have the right type and level of skill needed to ensure the organization works effectively?,Are members fully aware of their responsibilities and liabilities?,Is there a process of succession planning that ensures that not all members come up for election at the same time?
  • Financial climate -The importance of finances to an organization cannot be under-estimated.In order to evaluate the risk associated with your financial environment, consider the following;Does the organization rely on one source of income?, How easy would it be to replace that source of funding?, What would happen if the major funding source withdrew it’s support?
  • Policy and strategy – Risk arises in this area from both inside and outside your organization.The organization itself may have a policy that leads to risk, such as poor communication with stakeholders.Externally government policy like towards teaching of physical education in schools may bring about risks to a sports organization.
  • External factors -The external context can have a major impact on an organization.So the risks of the external environment must be critically evaluated.What external factors affect or may affect the operations of the organization?,How do these external factors affect the operations of the organization?Are there any mitigation steps that the organization has taken or will take to curb the situation at hand?
  • Operating effectiveness and efficiency- The way your organization operates may lead to risks,such as loss of sponsorship,loss of membership, poor use of resources or recruitment of inappropriate staff and volunteers.The two main questions to ask when assessing risks here are,Does the organization have a clear and appropriate strategy for achieving it’s objectives?,Is the strategy backed up by appropriate operating principles.
  • Financial prudence and probity- The efficient use of finances for their intended purpose is an ethical responsibility for all organizations.When assessing risks here ask this questions;Does your organization have clear and transparent accounting procedures?,Does the organization have financial control in place?,Is there a risk that these controls may be circumvented by those in authority?, Can the organization account for all it’s revenue and expenditure?Does the organization offer audited accounts to it’s stakeholders?
  • Legal risks- The manner in which your organization is constituted will determine the extent of legal liability it can bear as an independent entity,as well as the extent to which individual members or board members may bear personal liability.In addition it is necessary that all contracts that you enter into are reviewed by a legal expert to ensure that legal risks are properly identified.
  • Any other identifiable risks- This may be risks to do with the organization activity itself like financial responsibility,risk of injury during performance of some activities,risk of failure of machines used by the organization.Is there appropriate data backup and disaster recovery?, What are the IT maintenance and support service levels?
  • In order to identify potential risks,you should review the past history of the organization .That will highlight areas where things have or might have gone wrong if they had not been identified as problem areas.

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