Why implement a risk management program?
- THE TAKEAWAY: Risk management is not about red tape. It's about protecting your staff, members and visitors from injury or death, as well as protecting your organisation from legal liability, high insurance costs and reputational damage
All not-for-profit groups are exposed to a number of risks simply by virtue of the nature of the activities that they undertake.
It's your responsibility to do everything in your power to ensure that people and property closely related to our group are properly protected. The fact that many of the people we are talking about are volunteers who give freely of their time makes this even more of a priority.
What is risk management?
Whether it be a sticky-taped sign warning people to watch the step, a requirement that there are always at least two signatories to a cheque, inspection of a netball court before a game to ensure it's free of hazards or backing up the computers once a week to protect records, many organisations already have ways in which they currently manage risk.
Standards Australia describes risk management as actions that prevent "the chance of something happening that will have an impact on our objectives."
So the sign draws people's attention to possible danger, two signatories on a cheques guards against one person using funds without authority, the inspection ensures hazards that could injure players are removed, and the computer back-up protects your records should a virus or surge strike.
Risk management is the process of thinking systematically about all the possible risks, problems or disasters before they happen and setting up procedures that will avoid the risk, or minimise its impact, or cope with its impact.
It is also about making a realistic evaluation of the true level of risk. The chance of a tidal wave taking out your annual beach picnic is fairly slim. The chance of your group's bus being involved in a road accident or a volunteer tripping on a loose electrical cable during a working bee is a bit more pressing.
Risk management begins with three basic questions:
- What can go wrong?
- What will we do to prevent it?
- What will we do if it happens?
Not every risk can be prevented. Football clubs, no matter how good their medical and support team, cannot stop all injuries. Organisations cannot always predict how people will react and in some cases the very activity the community organisation was set up to do is risky.
Why should we bother with risk management?
Apart from the obvious answer of wanting to protect your own members, friends, family or competitors/clients etc. from injury or death, there are quite valid reasons why we should all look at developing a risk management process.
Protect your organisation from legal liabilitySome not-for-profit groups believe that by incorporating they can no longer be sued. This is not the case.
The effect of incorporation is to limit liability. However, directors and employees of corporations and members and officers of incorporated associations do have a risk of incurring liability if a personal breach of duty by them causes personal injury or damage to property. They can be liable if they directly caused the loss or damage or if they authorised and directed the actions which caused the event giving rise to liability.
Small organisations which take the form of a partnership are even more directly exposed to potential liability. Each partner has unlimited liability in respect of any liabilities incurred by the partnership.
There is a similar risk for members and officers of unincorporated community groups.
Lower insurance premiums
Insurers are increasingly focusing on providing cover to organisations that can prove that they do not present a "high risk". If you can provide evidence that you are effectively implementing safe practices and have moved to deal with major risks, insurers will be more likely to provide cover and to do so at a more reasonable cost.
By moving to limit risks you are showing to the wider community that you place value on everyone's participation and involvement.
This enhances your organisation's capacity to present a professional image, it enables you to promote and market yourself as an organisation that has strong standards of behaviour, reassures parents or carers that their charges are cared for in a professional manner, and assists your organisation to structure itself to run effectively and efficiently.
You can use the implementation of your risk management process to market these benefits to potential members and volunteers alike.
Better information for decision making
The process that you undergo in identifying, assessing and evaluating risks will highlight requirements that your organisation should review and prioritise.
By stepping through the process and continually reviewing these decisions over time you will enhance the capacity of your Board to make decisions based on facts rather than speculation.
Better asset management and maintenance
Setting up a risk management register will help you list all the physical assets owned by your organisation. It also encourages staff to act when the asset poses a danger.
Developing a formal risk management system does take time but there is no reason why you cannot begin the process now and build on it as you go (some is better than none).
There will be many organisations that will want to jump straight into risk management and have a formal document and mandatory statements and procedures all over the place within a month. Risk management, particularly when dealing with people's lives, is not something to rush into. At the same time there are immediate steps that can be taken:
Step One: Raise the subject at your next board meeting
Don't scare people off by using elaborate models and charts - simply explain the reasons behind why you need to begin to look at the process (take a copy of this help sheet). You really do need the support of your board.
Step Two: Display a Risk Register
- > Download this sample Risk Register to get started.
The aim of a Risk Register is to proactively, but without a major imposition on time and effort, begin to raise the profile of what risks exist within your group.
Members, staff and volunteers are requested to add items that they feel could be a problem (e.g. the fraying electrical cord to the jug or urn, the slippery tiles at the entrance, the jagged wire on the fence, etc). This is the first step along a detailed process.
NOTE - This is a preliminary proactive measure. It is not the be all and end all of a risk management process. There's a lot more to be done - consult the other help sheets for more information on what's involved.
Step Three: Communicate what you are doing and why
Let everyone know that you are taking this step to better ensure everyone's safety and that you need their help in adding items to the register. Ensure your organisation understands that this topic is important.
Be prepared for the knockers who may see risk management as little more than useless red tape or the nanny state gone mad (they may well be the same people who complain once you get a claim that you didn't act quickly enough).
It's your job to convince them of the value of this process. Check this help sheet for some tips on communication.