Comentario preliminar

Risk management as a process can be broken down into some key steps. The Australian Standard on risk management (AS ISO31000:2009 Risk management – principles and guidelines) prescribes a best practice process implemented by many organisations and is recommended by agencies such as NSW Treasury. Refer to the Australian Standard itself for more detailed information on the processes outlined in this section.

Key components of the risk management process as applicable to reserve trusts are set out in Figure 7.2.

We discuss each of these components below.

Depending on the size of your reserve trust or the complexity of the issues faced, you may wish to customise the suggested process. For example, the risk identification and analysis may be done as part of a trust board meeting rather than as part of a specific forum.

Figure 7.2 - A risk management process

Step1: Identify

The first step is to identify the risks that will affect your reserve trust. The key risk areas outlined in the risk management checklist can be used as a starting point, but these should be expanded to take into account any issues specific to your reserve trust.

You might wish to bring together a number of people to undertake this identification process. Consider using a reserve trust meeting to ask all trust board members what they think the key risks are for the reserve and for the reserve trust.

You may also choose to engage certain specialists to bring deeper perspectives on certain issues. For example:

• inviting a representative from an insurance company to explain risk management and insurance claims

• requesting a Police Liaison Officer to assist in identifying criminal risks, including fraud • involving an environmental specialist to identify risks affecting or associated with the

reserve’s environment

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• involving a representative from the WorkCover Authority of NSW to ensure that workplace risks are covered

• enlisting the support of a local businessperson to identify any risks associated with the administration of the reserve trust.

Another way of identifying more visible risks would be for trust board members and staff to undertake an inspection of the reserve facilities and document any identified risks.

Step 2: Assess

The next step is to assess each risk. This is done from two perspectives: • What is the chance of the risk occurring? (Likelihood)

• What is the impact if it does occur? (Impact)

A simple way of measuring these is to use a High, Medium or Low scale. It is useful to first define what each of High, Medium and Low means for your reserve trust so that everyone involved in the assessment process has the same understanding. Some definitions that you may wish to consider are set out in Figure 7.3.

Figure 7.2 - Sample definitions of Likelihood and Impact Likelihood Very unlikely – could

happen but probably never will

Unlikely – could happen but very rarely

Likely – could happen sometime

Very likely – Could happen at any time

Impact Very minor Minor Moderate Significant

Personal No injury Minor injury – e.g. ankle sprain Moderate injury – e.g. broken wrist Death/major injury – e.g. loss of limb

Financial Under $500 Between $501 and $1,000

Between $1,001 and $10,000

Over $10,000

Property Very minor damage to trust property Minor damage to trust property Moderate damage to trust property Significant damage to trust property and/or reputation

The combination of the Likelihood and Impact scores gives you an assessment of the severity of the risk. This combination can be reflected in a risk assessment matrix that can assist you in measuring your risk. Based on the example definitions above, an assessment table would be as follows:

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Figure 7.3 - Risk assessment matrix example L ik e li h o o d

Very minor Minor Moderate Significant

Very likely _{Medium High High High}

Likely _{Medium High High High}

Unlikely _{Low Low Medium High}

Very unlikely _{Low Low Medium Medium}

Impact

Two examples of using this assessment table are set out in Figure 7.5.

Figure 7.4 – Examples of risk assessments

Risk example 1 – A trust employee misusing trust funds

Likelihood If measures are in place to monitor the use of reserve trust funds (such as double signatories on cheques and/or approval from the trust required before funds can be spent), the likelihood would be unlikely. However, if these measures are in place, but they are not enforced, the likelihood would then be Likely.

Impact This would depend on what how much money was involved, and what the funds were used for (e.g. illegal purposes). If we assume that the amount involved was large , the impact would be Significant.

Overall assessment In this case the risk would be rated as High. This is largely because of the significant impact if the risk were to occur, coupled with the likelihood being assessed as “likely”.

Risk example 2 – An overseas visitor is injured after getting caught in a fast river current

Likelihood If appropriate warning signs are in place, in relevant languages based on visitation patterns, the likelihood would be very unlikely. However, we will assume that in this case the warning signs are only written in English. The likelihood would then be Likely.

Impact The impact in this instance would be at minimum Moderate. This is on the basis that the swimmer had a reasonable level of skill.

Overall assessment In this case, the risk would also be rated as High.

Risks that have been assessed as High should be dealt with first to see what can be done to reduce the likelihood of them occurring, to reduce their impact, or both.

Step 3: Treat

The action you take to reduce the likelihood of the risk occurring or reduce its impact is referred to as the ‘risk treatment’. A ‘risk treatment’ may not remove the risk entirely, but it establishes the process/ method to reduce the impact.

In Example 1 above, the treatment might be the provision, to reserve trust members and staff, of information about how reserve trust funds can be used and what they should not be used for. A treatment should be assigned to an individual (a reserve trust member or a staff member) to action with a due date for completion. This will allow you to monitor that it has been completed.

Step 4: Monitor

Monitoring means two things:

• making sure that treatments happen in the agreed timeframe and that they have the intended result

• maintaining awareness of factors that might change and thereby have an impact on the risks already identified. For example, the resignation of a treasurer might increase the risk that financial statements are not developed on time if there is no succession plan for that role.

Treatment strategies require monitoring to make sure they are completed and to ensure they have the desired impact. Treatments might need to be changed if the desired outcome does not occur. For example, giving information to staff about how reserve trust funds can be used might not impress on them the importance of the proper use of reserve trust funds, and a face-to-face briefing session to reinforce the message would be more effective.

It is also important to remember that risk management is not a one-off. Things change – both inside and outside the reserve trust – and it is necessary to think continuously about what these changes mean for risk. For example, a new trust board might mean that certain ways of

managing the reserve trust will change, potentially impacting on identified risks.

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