Strategic Risk Management for School Board Trustees

Transcription

1 Strategic Management for School Board Trustees A Management Process Framework May, 2012

2 Table of Contents Introduction Page I. Purpose II. Applicability and Scope III. Basic Definitions Framework Application 1. Background Objectives Strategic Management Process Alignment Application of Strategic Management Process Long Term Planning References

3 3 I. Purpose The Strategic Management Framework is intended to provide guidance to school board trustees in the development and implementation of a Strategic Management Process. This document has been developed using a number of resources including the (COSO) Framework document entitled Enterprise Management Integrated Framework, as well as other published framework documents to assist in developing a basis for understanding strategic and enterprise risk management concepts and benefits and for school boards and their trustees. II. Applicability and Scope The Strategic Management Framework is relevant to all school board strategic and business functions and should be applied at every level of a school division. Distribution This is not a classified document and internal general distribution should be encouraged. III. Basic Definitions 1. Strategic Management Strategic Management is a process for identifying, assessing and managing risks and uncertainties, affected by internal and external events or scenarios that could inhibit an organization s ability to achieve its strategy and strategic objectives. 2. Strategic Management Process: The Strategic Management Process ensures that the methodology is documented and implemented to enable the organization to realize the advantages associated with the integrated management of risk events at a strategic and operational level. This is accomplished through the development of plans, comprehensive procedures and standardized provisions for Identification, Assessment, Response, guidance and Monitoring goals. (see page 8) 3. Philosophy: By realizing that risk is everyone s job, the school division can proactively identify risk. This framework provides the school board with the tools and capabilities to develop solutions that will enable it to reduce vulnerabilities. It allows the school board to develop risk mitigation activities and to anticipate and act on potential, risky opportunities.

4 4 4. Enterprise Management: The Enterprise Management ensures that a coherent and consolidated methodology is documented and implemented to enable the school board to realize the advantages associated with the integrated management of risk events at an organizational level. This is accomplished through the development of plans, comprehensive procedures and standardized provisions for Identification, Assessment, Response, guidance and Monitoring goals. 5. COSO Framework: The Committee of Sponsoring Organizations of the Treadway Commission (COSO) initiated a project to develop a conceptually sound framework providing integrated principles and guidance supporting entities programs to develop or benchmark their enterprise risk management process. Key elements include the explanation of underlying principles of enterprise risk management, as well as benefits, limitations, roles and responsibilities of various parties. 6. Critical Categories: Specific risks can be combined into similar categories to simplify the assessment process and identify related issues that may be of an enterprise nature. s of lower priority can be relegated to receive less attention, while high-risk (critical) issues can be focused on more quickly for mitigation or corrective action. 7. Vision: This is a vision that sets out how strategic risk management will be used and integrated within the strategic planning process. The risk vision discusses how the school board and its operating segments, will focus its attention on aligning risk appetite and strategy, enhancing risk response decisions, identifying and managing cross-enterprise risks, exploiting opportunities and assisting with determining the most efficient use of resources. 8. Appetite: The term considers broadly the levels of risks that the school board is prepared to accept. 9. Tolerance: The term establishes acceptable levels of variation around objectives. Operating within risk tolerances provides greater assurance that the school division is operating within the Board s risk appetite which, in turn, provides a higher degree of comfort that the school board will achieve its objectives. 10. : s are uncertain future events, decisions or initiatives that could influence the school board s ability to achieve its objectives.

5 5 1. Background Strategic risk management is an effective tool to help protect and enhance the strategic planning process by minimizing exposure, reducing uncertainty and maximizing opportunity. A disciplined approach to strategic risk management will help ensure strategic efforts are not diminished through avoidable loss as a result of change or uncertainty and will also harness an ability to seize emerging opportunities. Strategic risk management is an anticipatory, proactive process that becomes a key part of strategic planning. The intent of the strategic planning framework is to: provide a common culture, understanding and language to help overcome varying risk perceptions across the school division; guide the school board in achieving a better understanding of its risks; contribute to the development of risk awareness in decision making; and provide a consistent means with which risk identification and mitigation can be identified and implemented. 2. Objectives: The objective of this document is to provide guidelines for the strategic risk management process. It is important to note that the guidelines and recommendations provided are not exhaustive and are intended as general suggestions only. Because school boards are unique, they must develop strategic planning processes that are tailored to fit their own specific organizational needs. Nevertheless, it is hoped that the general guidelines noted herein will act as a stimulus to your school board in order to generate an effective strategic plan.

6 6 3. Strategic Management Process Alignment a. Alignment with planning, execution and measurement Strategic risk management framework is designed to help school boards meet their objectives through the alignment of mission and vision with day-to-day activities of the organization. b. Mission and Vision The mission and vision represents the starting point for setting the overall priorities of the school division. They establish the direction for the future and provide focus for the core operations of the organization. c. Strategic Planning Process With the mission and vision defined, the school board will make regular decisions that involve balancing the needs of stakeholders, risks and opportunities. Strategic objectives will be established that take this balancing process into account. The school board will then set specific performance targets for each strategic objective. The risks to the achievement of each objective will be identified and assessed. In prioritizing these risks, both the relative importance of the respective objectives and the potential impact of each risk will be considered. The school board will respond to each key risk and will expect the business units within the school division office to address each of the risks and develop mitigation options.

7 7 Mission Vision Strategic Strategic Planning Process Education Services Service Facilities Transportation Human Resources Operational Business Unit Plans Finance Process Identify Assess Respond Monitor Day-to-day Operations and Decision Making Process Operational d. School Division Business Units Business Unit plans set out actions required to make strategic objectives and selected risk responses a part of daily operations. These plans become the basis for setting the day-to-day priorities of the business operations and should help facilitate appropriate direction to its operating segments. While both internal and external factors pose risks to the strategic plan, the risk process at the school division level should consider the risks of delivering on expectations to support the school board s mission and strategic initiatives.

8 8 4. Application of the Strategic Management Process The strategic risk management model integrates the mission and vision setting with the establishment of strategic objectives, development of business plans and execution of operations on a day-to-day basis. The strategic risk management model provides a continuous means with which to the school board can validate objectives, identify roadblocks or hurdles, and develop and implement appropriate mitigation strategies. Identification register, risk context, categories and board level sponsorship Forward to appropriate mgmt level Assessment Likelihood, Impact, effectiveness of existing controls and Ratings Take next step or action Response define desired outcome, develop mitigation options, design control measures. Take next step or action Monitoring assess effectiveness, confirm expectations, reassess Tolerance a. Identification The first step in risk identification is to clearly identify the key strategic objectives. Next, the exposures, uncertainties and opportunities that relate to these objectives must be identified. The findings of this assessment provide the basis for the framework and will require continuous evaluation and updating. These need to be recorded in a risk register provided in the strategic risk management template. Where risks have been previously identified, steps will consist of confirming completeness with special consideration for changes in the planning or operational environment.

9 IMPACT 9 b. Assessment Once risks have been identified, they should be profiled and analyzed so that an appropriate mitigation strategy and action plan can be developed. s are to be profiled and prioritized on an ongoing basis to focus attention on the areas in which a response action is appropriate. s are characterized by: Severity the impact from insignificant (low) to catastrophic (high) of the potential occurrence on the achievement of objectives; and Probability the likelihood from rare (low) to almost certain (high) of the occurrence in the current environment. The risks will be prioritized based on a combination of the relative importance of the school board s strategic objectives to which the risks relate, and the profile of each risk relative to other identified risks. A comprehensive analysis of the risk must be performed to determine causal factors, such as personnel, funding, and technology, as well as the primary cause. This will necessitate a thorough understanding of the environment in which the objectives are set. For each risk category, specific symptoms or indicators are used to monitor the current state of the category. The summation of Impact and Likelihood provides a risk rating which represents the state of each particular risk category. The matrix appearing below will act as a dashboard for school boards to assist in the easy identification and prioritization of risks. Moderate Major Maximum Minor Moderate Major Matrix Minor Minor Moderate LIKELIHOOD c. Response Once risks have been analyzed, categorized and linked to strategic objectives a risk response can be developed to minimize unacceptable risk and maximize opportunity.

10 10 School boards have the following response options available to them: Accept the acceptance of within prescribed limits; Avoid the not undertaking the activity; Reduce the invest in Control mechanisms; and Transfer the cede or share the with others. The selected risk response should be specific to the circumstances considering the school boards mission, vision, costs, risk appetite and risk tolerance levels. Once a risk response strategy has been formulated, an action plan must be developed and implemented. These action plans may be captured in strategic initiatives, or individual performance objectives. Action plans should be supported by time-related deliverables with clear assignments of responsibility and accountability. Rating Likelihood Impact Consequences Action Indicated Maximum Drastic this could result in the complete failure of the initiative. Requires essential and immediate allocation and organization of resources within the program to manage/mitigate the risk. Establish plans and countermeasures. Assign a person to constantly monitor. Major Noticeable this will impact the strategy by delaying completion of tasks requiring investment of additional resources with the consequential increase in costs or the need to replan the work. Requires priority allocation of resources for management and/or mitigation. Establish plans and countermeasures. Assign a person to monitor at intervals. Moderate Some it may be that we cannot contain the disruption within existing time or budget contingencies, but are prepared to accept the consequences. Allocation of resources for study of the risk is desirable if available. Nominated person monitors the risk periodically. Minor Slight there is sufficient built-in contingency and the school board has the tools, techniques, resources, skills, finances, research facilities and network of contacts to contain the risk. identified and included in Report. reviewed periodically.

11 11 d. Monitoring Performance relative to the strategic risk management action plans should be monitored on an ongoing basis. This is accomplished through the establishment and monitoring of objective- and risk-related performance targets. 5. Long-Term and Ongoing Planning School boards should develop and maintain an active planning and review process of their strategic and operation plans. They should ensure the school division resources follow short and long-term goals and objectives and accomplish planning milestones. Specifically, long term planning should accomplish the following: ensure the school board is prepared to identify and respond to their unique situations that will affect their strategic goals and objectives; ensure the school board is prepared to take action to support their strategic objectives; provide a means of information sharing to ensure risks are coordinated between school boards and division offices and visa versa;

12 12 REFERENCES: 1. Enterprise Management Framework, Committee of Sponsoring Organizations of the Treadway Commission, September, Australia/New Zealand ERM Framework, AS/NZ4360, August, and Insurance Management Society - Strategic Management, Enterprise Management Framework (draft), November, Management Magazine - Development of Key Drivers, August, University of Washington Management Toolkit for Education 7. Business Continuity Planning A Frame work for Public Sector Organizations 8. University of Saskatchewan Presentation on the Value of Strategic Management for Board Members