DERBYSHIRE COUNTY COUNCIL RISK MANAGEMENT AWARENESS TOOLKIT FOR ELECTED MEMBERS Martin Brassington and Tom Smith 2006

Toolkit objectives These slides will enable you to understand: What is meant by Risk Management Understand why it is important Understand how it fits into the budget and business planning processes Your role in the process How risk registers are developed How to contribute fully to the corporate risk management process

What is Risk Management? Risk management is the practice of Identifying, Analysing, and Controlling, in the most effective manner, all threats to the achievement of the strategies, objectives and operational activities of the organisation.

Risk Management - why bother? (1) To comply with best practice in Corporate Governance Key Performance Indicator for DCC in the Comprehensive Performance Assessment (CPA) process It helps us drive the Council Plan by ensuring that risks are managed effectively It encourages innovation and helps us manage change because we can move forward with confidence knowing that the risks have been identified, measured and managed Good risk management arrangements are integral to sound and effective financial management Well managed risks means we deliver best value To make effective and efficient use of resources - Gershon To protect the Council’s assets - people and property and ensure service continuity There is an increasing recognition of risks facing Councils.

Risk Management - why bother? (2) The visible “Cost of Risk” to Derbyshire CC is in the region of £6.8m. This includes premiums paid to insurers, premiums set aside to fund claims internally and claims costs Examples of insurable risks faced by the Council include: –Fire, Weather, Theft, Motor Accidents. –Accident/illness to employees. –Claims by members of the public The Health and Safety Executive calculate that the invisible cost of a claim is 8 to 32 times the cost of settlement The above takes no account of uninsured risks such as adverse publicity that results in damage to the image and reputation of the authority.

Categories of Strategic Risk Examples: National Agenda v Local Agenda; Ring fenced funding

Example of the Risk Management Process Source – Association of Loacal Authority Risk managers (ALARM

Risk Management at the Corporate level Identification, Management and Control of Strategic Risks Catastrophe risk financing e.g. insurance or reserves Risk management facilitation – systems and structures

Risk Management in DCC THE COUNCIL PLAN: Corporate Aims and Objectives Risk Management Policy/Strategy approved by Members that sets out the roles and responsibilities of members and officers and outlines the way in which the council will manage its risks Corporate Risk Register that details the significant corporate risks affecting the authority and includes service specific risks that have a corporate dimension or impact Quarterly and full annual reviews reported to Audit Committee Annual review also taken to Cabinet and Full Council Details of major risks taken into account by Members when formulating the budget Departmental Risk Registers detail the risks specific to a department, function or service Details are incorporated into the Service/Business Plans Funding for major risks is included in the budget bids Project Risk Registers for major projects e.g. Waste Management; BSF, MEGZ Reporting

Example risk register – Cultural and Community Services

Risk Ranking Risks are ranked according to their impact (severity) and their likelihood (probability) and this is shown diagrammatically on the following slide There are 3 elements to the scoring Financial considerations ( financial impact of the risk) Other considerations e.g. service disruption, damage to reputation, claims against the council ( the impact these considerations would have on the council) Likelihood (the probability of the risk occurring) The elements are scored between 1 and 3, with 1 being low and 3 being high The scores for the financial and other considerations are added together and then multiplied by the probability score For example this risk scores as follows: Financial impact 2, Other considerations 3, Likelihood 2 Therefore the risk ranking is = 5 multiplied by 2 =10

Risk Ranking ConsiderationsProbability or Likelihood FinancialOther 1 Low Med + 2 x 2 3 High 3 3 Lowest score x 1 = 2 Highest score x 3 = 18

How the CPA sees Members contributing to this process? (1) The council has adopted a risk management strategy/policy that has been approved by members. Compliant There is a member committee with specific responsibility included in its terms of reference to consider corporate risk management. Compliant Reports to support strategic policy decisions, and project initiation documents, include a risk assessment. Compliant 2

How the CPA sees Members contributing to this process? (2) The member committee with responsibility for risk management receives reports at least quarterly and takes appropriate action to ensure that corporate business risks are being actively managed, including reporting to full council at least annually Compliant The members with specific responsibility for risk management have received risk management awareness training. Compliant

How the CPA sees Members contributing to this process? (3) All members have received risk management awareness training. Partially compliant – this toolkit is part of the process A senior officer and member jointly champion and take overall responsibility for embedding risk management throughout the council. Compliant Chair of Audit Committee and Strategic Director of Corporate Resources

Getting involved Challenge officers about risks relating to the Council’s policies and activities Identify risks when undertaking your duties as an Elected Member and bring them to the attention of the appropriate officer(s) Use this toolkit and attend risk awareness events and training when offered

Officer support –The Risk and Insurance Manager and the Risk Manager are able to provide advice and guidance –Chief Officers and their departmental management teams understand the risks to the services that they manage –The Risk Management Group support initiatives within all departments –The Councils insurers and broker are able to provide other specialist advice

Contacts Members of the Audit Committee Councillor Walter Burrows – Chair and Member Risk Champion Councillor Eric Lancashire MBE Councillor Tracey Critchlow Councillor Mark Higginbottom Officers: Gerald Tommy - Deputy Chief Executive and Officer Risk Champion, Ext Graham Hunt – Head of Corporate Finance Ext Chrystal Wallage – Assistant Head of Corporate Finance (Audit) Ext Martin Brassington – Risk and Insurance Manager Ext Tom Smith – Risk Manager Ext. 7975