Contents Contents Before you begin Learning outcomes Competency standard How to use this book Assessment Developing employability skills Developing an evidence portfolio Resources v v vi vii viii ix xii xiii Introduction: Managing risk 1 Chapter 1: Establishing the risk context 5 1.1 Reviewing processes, procedures and requirements for risk management 6 1.2 Determining the scope for risk management processes 11 1.3 Identifying stakeholders and their issues 14 1.4 Reviewing political, economic, social, legal, technological and policy context 17 1.5 Reviewing existing arrangements 20 1.6 Documenting critical success factors, goals and objectives 22 1.7 Obtaining support for risk management activities 25 1.8 Communicating the risk management process and inviting participation 27 In ACTION 30 Discussion topics 31 Chapter summary 31 Find out more 31 Checklist for Chapter 1 32 Assessment activity 1: Establishing the risk context 33 Record your employability skills 34 Chapter 2: Identifying risks 35 2.1 Inviting appropriate people to assist in identifying risks 36 2.2 Researching risks 40 2.3 Using tools and techniques to generate a list of risks 43 In ACTION 46 Discussion topics 46 iii
Chapter summary 46 Find out more 47 Checklist for Chapter 2 47 Assessment activity 2: Identifying risks 48 Record your employability skills 49 Chapter 3: Analysing risks 51 3.1 Assessing the likelihood of risks occurring 52 3.2 Assessing the impact or consequence of risks 56 3.3 Evaluating and prioritising risks for treatment 59 In ACTION 64 Discussion topics 64 Chapter summary 64 Find out more 65 Checklist for Chapter 3 65 Assessment activity 3: Analysing risks 66 Record your employability skills 67 Chapter 4: Selecting and implementing risk treatments 69 4.1 Selecting the most appropriate options for treating risks 70 4.2 Developing an action plan for implementing risk treatment 75 4.3 Communicating risk management processes 78 4.4 Ensuring documentation is in order and stored appropriately 80 4.5 Implementing and monitoring an action plan 82 4.6 Evaluating the risk management process 84 In ACTION 89 Discussion topics 89 Chapter summary 89 Find out more 90 Checklist for Chapter 4 90 Assessment activity 4: Selecting and implementing risk treatments 91 Record your employability skills 92 Final assessment: BSBRSK501A Manage risk 93 Employability skills 96 iv
Before you begin Developing employability skills Employers in Australia and overseas have made it very clear that the task-specific knowledge and skills people develop in learning programs are not enough to make them productive, valued employees. Employers today value people who fit well into their workplace, use their initiative to solve day-to-day problems, work productively, manage their time effectively and are keen to continue learning. These types of skills are known as employability skills. Because of the high value that employers place on employability skills, they also play an important part in the way you will be assessed in this unit. The following table outlines the facets of the employability skills relevant to the Diploma qualifications Aspire has developed workbooks for and examples for how you might develop these skills. Review the examples provided in the table for the particular Diploma qualification you are undertaking. There is a table provided after the final assessment where you can record the activities you ve undertaken to develop the employability skills. This can form part of a portfolio of evidence for this unit of competency. Employability skill Business BSB50207 Business Administration BSB50407 Management BSB51107 Communication Conduct research to collect and analyse information in a range of reports. Consult with others to develop a range of plans and reports. Liaise with stakeholders and promote participative workplace arrangements. Negotiate solutions to new and emerging issues. Manage organisational systems and processes to ensure usability and compliance by all staff. Participate in complex interpersonal exchanges requiring excellent negotiation and writing skills. Use effective interpersonal skills and relate to a wide range of internal and external clients. Communicate with business contacts to promote the goals and objectives of the business. Obtain feedback from colleagues and clients. continued ix
continued Employability skill Business BSB50207 Business Administration BSB50407 Management BSB51107 Teamwork Contribute to the development of other team members. Provide feedback on team performance to colleagues and managers. Delegate tasks as per job role responsibilities to appropriately skilled team members. Work and consult with others to develop systems and processes. Lead, plan and supervise the performance of team members to develop team cohesion and to foster innovative work practices. Problemsolving Apply risk management processes to business operations. Assess financial viability of new opportunities and match organisational with market needs. Anticipate problems and prepare contingency plans. Control budgets, reconcile figures, rectify anomalies and apply estimating skills. Research and analyse data to prepare work plans and processes as required. Access and assess information for accuracy and relevance. Develop strategies for minimising risks. Initiative and enterprise Encourage creative and innovative workplace solutions. Identify new and emerging opportunities for the business and develop strategies to capitalise on them. Manage, foster and facilitate change. Be creative and provide innovative solutions to complex issues. Choose appropriate systems to meet organisational needs. Design and develop documentation and related processes. Respond to new and changing circumstances to ensure accurate and timely advice. Identify networking opportunities and develop operational strategies to ensure the viability of the business. Instigate new or different work practices to improve productivity or service delivery. continued x
Chapter 2: Identifying risks Chapter 2: Identifying risks Identifying all the risks your organisation or unit faces is the next step in a risk management process. Use your team members and other stakeholders to ensure you identify all potential risks. Where your risk management scope extends beyond your personal business area or unit, it is essential you include appropriate specialists from those areas to help derive the most comprehensive risk identification possible. Although there are risks common to all areas of an organisation, each business unit may have risks specific to their operation. To be sure you identify risks thoroughly and accurately you need to go through a structured process using relevant tools and techniques. This chapter will discuss the following theory: 2.1 Inviting appropriate people to assist in identifying risks 2.2 Researching risks 2.3 Using tools and techniques to generate a list of risks 35
2.1 Inviting appropriate people to assist in identifying risks When identifying risks it s essential everyone involved in the organisation or who is impacted by risk management decisions is consulted and has the opportunity to provide input. In addition to inviting internal personnel, such as managers and staff, to participate, you may need to target specific stakeholders, advisors, technical experts or other specialist personnel. When a course of action may impact upon the public you might need to consult residents, councillors and other local stakeholders. The type of specialist who can assist you with risk identification depends upon the types of risk you expect to encounter. These should have been identified and documented in your list of stakeholders. By using everyone s knowledge and skills you can generate a range of risks you may not have considered. The following table lists some of the stakeholders, consultants and specialists you may need to consult and invite to participate in identifying risks in your organisation or business area. Risk area Who What they can offer Finance Accountant (internal) Audited books, profit/loss details, financial impact of previous events, costings of risk servicing, financial impacts of negative (or positive) risk events Sales and marketing Directors/members of the board (internal) Auditors (external) Financiers (external) Shareholders (external) Marketing managers (internal) Marketing research company (external) Members of the public (external) Shareholders (external) Strategic planning, upcoming events, mergers, acquisitions, disposals. Financial risks associated with other entities Risks associated with borrowings, refinancing, currency movement (exchange rates, interest rates) Their perceptions on future events, whether they would participate in share buybacks, splits, new issues etc. Market research on current conditions, budgets, advertising campaigns Broader market research on current conditions, budgets, advertising campaigns than may be possible using internal assets Attitude toward the company (reputation), level of trust in the company s product or service. Initial feelings about future advertising campaigns, effectiveness of current marketing continued 36
Chapter 2: Identifying risks 2.3 Using tools and techniques to generate a list of risks Make sure the list of risks you have identified is as comprehensive and specific as possible. Are you positive you ve captured all the risks applicable to your scope and not just in a few areas of expertise? How many of the risks you identified in 2.2 are either irrelevant or insignificant when contextualised? As you identify the risks it s also useful to find out the nature of the risk. What factors are contributing to the cause of the risk. Are they internal or external? At this point you need to meet with your stakeholders and invited participants to help you identify the most complete and thorough list of risks facing your scope. To achieve this most effectively, you need to apply a range of tools and techniques. Brainstorming Brainstorming is a technique commonly used to identify a range of ideas from many different perspectives. Remember to take all responses from participants. The results are then filtered to eliminate duplicates and each suggestion is further refined for clarity. To gain the most from such an activity, be well prepared with a structured plan to conduct the session. For example, you might go through each category identified in the business plan and ask what they think are the risks that might be present for each one. Here is an example of suggestions made for two risk areas. Example Market-centred risks Falling product demand Competition Lack of diversity of products Changing economic conditions Sales and marketing management Technology risks Equipment breakdown Viruses Lack of training Poor management Current system outdated Fishbone diagrams A fishbone or Ishikawa diagram (named after its inventor) is often used in project management for cause and effect identification. To apply in risk identification, you start with writing the category on the backbone of the fish then spin-off into the smaller bones as you identify risks and refine your ideas. The risks become more focused and clearer. 43
Example How to use a fishbone diagram 1. Prepare the basic framework of the fishbone diagram on a whiteboard or a large paper. 2. 3. 4. 5. Define the category that needs to be addressed and write it in clear and simple terms in the fish s spine; for example, Personnel. In collaboration with participants, identify and define the risks associated with personnel on the major bones and write these at the tips. These headings could be developed through a brainstorming session, which focuses on the category in the fish s spine. For example, personnel risks might include lack of training, illness, recruitment costs, travel, resignations. Tease out the causes or contributing factors (risks) by further brainstorming, and adding these ideas and suggestions to the smaller bones on the diagram. For example, the risk of lack of training might encompass further risks such as poor training, no budget for training, staff go elsewhere. Interpret the fishbone diagram once it s finished to develop a checklist of risks. Lack of training poor training no budget Illness Recruitment costs staff go elsewhere PERSONNEL Travel Resignations Flowcharts Another process management and analysis tool is a flowchart. This method allows you to progress ideas through logical steps. Not so much a development tool but a process streaming tool, a flowchart can be used to spawn ideas by analysing each step of a project or process for potential risks. For example, the steps in property management would involve screening the potential tenants, signing them to a lease and making regular property inspections. By looking at each step and documenting it on the flow chart, you may be able to identify risks inherent in each step. 44
Practice task 11 1. 2. Select one of the methods outlined in this section to generate a list of risks for your organisation or unit. Explain why you used this method. In ACTION The board of XMX Packaging and Plastics (XMX) initiates a risk management plan for safety at their manufacturing facility in Western Sydney. The process of risk identification is passed to a three-person team comprising a safety officer, a union steward and the facility manager. The first point on the XMX agenda is to invite specialists in to assist in recognising and understanding the risks in the plant processes. The specialists include a chemicals advisor, a technical advisor from the company that made the plant machinery, a representative from the fire department and an external OHS auditor. With the help of these extra personnel, the XMX team shares research information about the various safety risks and hazards that are present at the plant. These are quickly filtered, and generic risks and hazards are identified, to fit the scope as provided by the board and refined earlier. Discussion topics Learners in a classroom can form a discussion group or have a debate. Those in the workplace might like to brainstorm these ideas with their colleagues. If you are learning independently, you might like to set up a chat room with other learners or ask a friend for their opinion. The most current and practical risk identification skills come from those working in the process today. Discuss how valid this statement is and what other options may exist. What benefits can be gained from employing or contracting external consultants in the risk identification process, and what may be some of the drawbacks? Risk identification processes are many and varied. What risk identification processes are available in your organisation, or have you come across, and how effective were they? Chapter summary In identifying the risks to your organisation, it is wise to engage experts or specialists in the areas or fields within your scope, both internal and external. They provide you with the greatest opportunity to capture all relevant risks. Once you have identified your risks, research them thoroughly using a range of sources such as existing data and statistics, market research, literature review, lessons from experience, public consultation. Use a variety of appropriate tools and techniques to further identify risks and ensure you have covered each area thoroughly. These may include brainstorming, fishbone diagram, checklists, flowcharts and scenario analysis. 46
Final assessment: BSBWOR501A Manage personal work priorities and professional development Final assessment: BSBRSK501A Manage risk To be assessed as competent in BSBRSK501A Manage risk, you must provide evidence of the specified essential knowledge and skills. Details of the essential knowledge and skills can be found in the Before you begin section of this workbook. Assessment mapping The following table maps this final assessment activity against the elements and performance criteria of BSBRSK501A Manage risk. Part Element Performance criteria A All All B All All C All All Detailed mapping of this workbook against the methods of assessment, the elements, the performance criteria and essential skills and knowledge is available in the Aspire Trainer s and assessor s guide for this unit. The following activity forms part of your assessment of competence. You may also need to provide various workplace documents or third-party reports. Your trainer will give you guidance in this area. The following activity has been designed for all learners to complete. Part A: Essential skills The following skills have been identified as essential for this unit of competency: communication and literacy skills to consult and negotiate, to prepare communications about risk management, and to encourage stakeholder involvement organisational and management skills to plan and implement risk management processes problem-solving and innovation skills to find practical ways to manage identified risks. You need to demonstrate your ability to apply these skills in your work. The following list provides some strategies you might use to demonstrate your competence in these essential skill areas: responding to direct questions providing portfolios of evidence and third-party workplace reports of your on-thejob performance by the candidate 93
being observed participating in presentations and meetings responding to oral or written questioning to assess knowledge of risk management policies and procedures documenting critical success factors, and goals or objectives for area prioritising risks for treatment providing examples of action plans for implementing risk treatment providing examples of documentation communicating risk management processes to relevant parties. Part B: Essential knowledge Conduct the research for, then prepare an outline of a risk assessment project in your organisation or business unit or area within your organisation. You can use material you have already developed during this workbook. You are encouraged to work in teams (of between two and four people) to gather required information. However, your final report product must be your own. Your risk management plan should be presented in a report format and must include the following information. Risk management plan Background 1. 2. The sector your organisation operates in (for example, construction or mining), and in what capacity (for example, specialised equipment leasing or contract catering). The process to be undertaken, referencing the standard, and citing the seven main elements of the risk management process as identified in the AS/NZS 4360:2004. Context 1. Areas of legislation, codes of practice and national standards which are applicable to the conduct of risk management with your organisation. Explain how the following will be applied. duty of care company law contract law environmental law freedom of information industrial relations law privacy and confidentiality legislation relevant to organisation s operations legislation relevant to operation as a business entity access and equity to risk management processes and resources for people with a disability. 94