1. Managing Quality & Risk Week 4 – 01 October 2015 - Risk and Failure Module leader – Tim Rose

2. Going, going… GONE! http://www.retail-week.com/sectors/general-merchandise/what-went-wrong-for-woolworths/1941462.article

3. Module route map Semester 1Date (W/c)Content Week 107/09/2015Introduction to Module & Topic Week 214/09/2015The Properties of Risk Management Week 321/09/2015The Properties of Quality Management Week 428/09/2015Risk and Failure Week 505/10/2015Risk and People Week 612/10/2015Quality Monitoring and Controlling Processes 19/10/2015College closed for staff development 26/10/2014Reading week Week 702/11/2015Risk Management Systems [1] Week 809/11/2015Risk Management Systems [2] Week 916/11/2015Independent research Week 1023/11/2015Peer review Week 1130/11/20151:1 Tutorials Week 1207/12/2015Assignment workshop/ revision N/a11/01/2016Exam

4. Intended learning outcomes By the end this session you will:  Discuss research findings in relation to a selection of QMS (Quality Management Systems)  List factors of failure in modern business operation  Discuss the characteristics of Highly Reliable Organisations (HROs)  Explore financial risk.

5. Factors of Failure – Product Failings [Sadgrove, p.92 (2015), The Complete Guide to Business Risk Management]  Out of stocks  Lack of competitiveness (design, technology or price)  Unsafe product  High costs:  High Inventory  Write-offs  Mark downs  Variable Product Quality  Catastrophic failure.

6. Factors of Failure – Service Failings [Sadgrove, p.92 (2015), The Complete Guide to Business Risk Management]  Lack of available staff  Incorrect information, service or technique  Bad or wrong service  Poorly motivated staff  Staff turnover  Unsafe or risky service  High service costs.

7. The Drift Towards Failure [1] [Sadgrove, p.96 (2015), The Complete Guide to Business Risk Management] Staff behaviour Cost cutting Amended processes Component faults

8. The Drift Towards Failure [2]  Small steps towards failure that aren’t noticed  A new lower ‘normal’ is established, starting a downward trend  Careless staff behaviour and amended processes gradually reduce margin of safety, thus creating more risk  Drift can occur as organisations look to “cut out flab” and introduce efficiencies; people get tired and make mistakes, machines wear out and break down  Drift to failure is due to unanticipated and non-linear interactions between components, rather than actual component failure. [Sadgrove, p.96 (2015), The Complete Guide to Business Risk Management]

9. The Drift Towards Failure [3]  Failures should be investigated and lessons learnt  Built-in redundancy  Duplicate machinery  Over staffing  Regular audits help prevent drift by:  Maintaining standards  Focusing minds  Spots problems before they become serious. [Sadgrove, p.96 (2015), The Complete Guide to Business Risk Management]

10. Highly Reliable Organisations (HROs)  HROs are organisations that avoid risks and catastrophes in complex and risky environments where such problems would be expected, such as:  Nuclear Power Plants  Air Traffic Control  Military Bases. [Sadgrove, p.97 (2015), The Complete Guide to Business Risk Management]

11. Characteristics of HROs CharacteristicPractical implications 1. Preoccupied with failure The organisation is constantly aware of the possibility of trouble, and is alert to the signs of failure 2. Reluctant to simplify interpretations People in HROs look beyond first impressions, labels and established beliefs 3. Sensitive to operations Senior people in HROs remain closely in touch with the organisation’s daily operations 4. Committed to resilience HROs value continual learning. People adapt as circumstances change 5. Defers to expertiseThe HRO values relevant knowledge, skills and observations, irrespective of the individual’s position in the hierarchy. [Sadgrove, p.97 (2015), The Complete Guide to Business Risk Management]

12. Financial Risk  Regards profitability  Predicting ‘growth periods’:  Anticipating ‘peaks and troughs’  Excessive debt causes:  Expanding too fast  Failed acquisitions  Being the victim of private equity deals  Long-term lack of profit. [Sadgrove, p.265-268 (2015), The Complete Guide to Business Risk Management]

13. Financial Warning Signs  Regular requests for short-term increases to overdrafts  Paying bills in ‘cash’  Missing payments to HMRC or Tax Office  Management heavily discounts products to generate cash  Regular reminders for unpaid bills/ missed payments  Survival mode. [Sadgrove, p.270 (2015), The Complete Guide to Business Risk Management]

14. Learning outcomes from this session Throughout this session you have: Discussed research findings in relation to a selection of QMS (Quality Management Systems) Listed factors of failure in modern business operation Discussed the characteristics of Highly Reliable Organisations (HROs) Explored financial risk.

15. Assessment: What you need to know… Task 1: Quality and Risk Audit (70%)  2,500 word limit  Deadline – 2355, Thursday 10 December 2015

16. Example report structure* 1. Introduction  Objectives; organisational/ personal  Quality frame work; i.e Kitemark BSI/ EFQM/ Six Sigma. 2. Background  Context of audit; historical/ emerging issues  Key theories/ approaches 3. Review of quality and risk issues  i.e. SWOT Analysis, Gap analysis  Commentary 4. Quality and Risk Evaluation  Research; primary/ secondary  Risk; register/ assessment/ matrix 5. Findings  Audit results; summary of insights 6. Recommendations  Measurable actions; SMART 7. Conclusion 8. References 9. Appendix. *Suggestion only, not to be treated as an exact guide as each audit will vary depending on any number of factors.

17. What is an audit? What is auditable?

18. Audit – Personal competencies  Communicating  Questioning techniques  Influencing others  Searching & analysing information  Thinking & taking decisions  Professional competence  Confidentiality.

19. Audit - Knowledge requirements  Analytical techniques  Communication  Management of information  Confidence/competence in subject matter  Engagement, involvement & motivation  Organisational context  Ability to manage Quality Management procedures.

20. Audit - Performance criteria  Define purpose  Set strategic context  Agree plan and schedule  Give notice to auditees  Confirm responsibilities  Audit investigation detailed to reveal issues  Agree plan to manage issues/mitigate risks  Engage stakeholders - bring them with you on the audit journey  Complete quality audit records  Carry out evaluation.

21. Audit - Evidence requirements  Audit substantiated by factual evidence  ‘Follow the evidence’ not straight to a solution  Provide objective analysis & recommendations  Gain evidence from a range of sources  Gather individual contributions – e.g. senior management, colleagues, suppliers, clients  Consider competitor analysis  Use open & closed questions  Retain a comprehensive audit trail  Plan follow up audit.

22. Out of class activity  Research a scenario in your organisation where improvement has been made to the quality of performance of a product or service following auditing activity  What type of terminology is used in that approach to managing quality?  What are the short/ long term benefits of the process?  Suggested reading: Sadgrove, K (2015) The Complete Guide to Business Risk Management  Chapter 4: Treating Risk: …  Chapter 5: Product and Service Problems.