Risky business

What is risk management?

The Australian/New Zealand Standard for Risk Management (AS/NZS 4360) defines risk management as:

"The culture, processes and structures that are directed towards the effective management of potential opportunities and adverse effects."

What is risk?

The Australian/New Zealand Standard for Risk Management (AS/NZS 4360) defines risk as:

"The chance of something happening that will have an impact upon objectives. It is measured in terms of likelihood and consequences."

Risk reduction

The Australian/New Zealand Standard for Risk Management (AS/NZS 4360) defines risk reduction as:

"A selective application of appropriate techniques and management principles to reduce either likelihood of an occurrence or its consequence or both."

Risk transfer

The Australian/New Zealand Standard for Risk Management (AS/NZS 4360) defines risk transfer as:

"Shifting responsibility or burden for loss to another party through legislation, contract, insurance or other means."

Risk acceptance

The Australian/New Zealand Standard for Risk Management (AS/NZS 4360) defines risk acceptance as:

"An informed decision not to become involved in a risk situation."

With Australian sport and recreation organisations facing the increasing risk of litigation, many organisations are recognising the need to provide protection for their volunteers, members and participants.

Identifying potential risk and creating a risk management policy for your club, group or event can have a number of subsequent benefits. These can include:

• Good business and management practice.
• Assistance with strategic planning.
• Reducing unexpected and costly surprises.
• More effective and efficient allocation of resources.

Why do we need to manage risk?

• Helps you to clearly define insurance needs.
• Compliance with regulatory requirements.
• Assists in preparation for auditing.
• Lessening risk may encourage more people to participate in your activity.
• Better results from projects and programs.
• Better information for decision making.
• Balancing opportunity and risk.

When do we need to  manage risks?

ALL THE TIME

Risk management is an ongoing process applied to all aspects of your operations. Any new project, event or competition should have a risk assessment completed. Risk management is a five-step process

The five steps:

• Establish the context.
• Identify risks.
• Assess risks.
• Treat risks.
• Ongoing monitoring and review.

1. Establishing the context

• The scope of risk management within your organisation.
• The aims and objectives of your own risk management program in relation to your organisation.
• The Who, What, When, How and, of course, with What resources?
• Determine criteria for treating risks.
• Define the extent and comprehensiveness of the risk management activities.
• Define the project or activity for which you are going to identify risks.
• Define your risk assessment criteria table.
• Define your risk acceptance criteria.

2. Risk identification

Potential risks can be identified through various methods such as:

• experience and records;
• brainstorming;
• systems analysis;
• personal reports;
• audit and other recommendations;
• what can happen? List events that might happen; and
• how and why it can happen – list the possible causes and scenarios.

3. Risk assessment

To assess the likelihood of potential risks.

• Likelihood – used as a description of probability and frequency.
• Consequence – the outcome of an event or situation could be a loss, injury, disadvantage or gain.
• Look at the adequacy of existing risk management strategies.
• How likely is an identified risk to occur?
• What are the consequences if it occurs?
• Decide which risks are to be treated or accepted?

The ‘Risk management strategy grid’ and ‘Risk assessment and acceptance table’ on pages 5 and 7 may help you to determine the likelihood, possible consequences and levels of potential risks.

4. Risk treatment and control

How to treat and control potential risks:

• Reduce the likelihood.
• Reduce the consequences.
• Transfer the risk i.e. use of insurance.
• Accept the risk.
• Avoid the risk.

The ‘Risk management template’ and ‘Risk management action plan’ may help you to develop a risk management action plan for your organisation.

5. Monitoring and review

Potential risks can be monitored and reviewed through the following:

• Risk reviews.
• Claims performance reports.
• Audits (internal and external) reporting.
• Progress of the Risk Treatment Plan implementation.

What areas need to be treated by process?

Identify key function areas as:

STRATEGIC

Those risks associated with the high level goals, objectives and strategies of the organisation and its divisions. These strategic risks are most relevant to associations or large clubs.

GOVERNANCE/OPERATIONAL

Those risks associated with the functions of the organisation performed on a daily basis. Finance, decision-making, marketing and promotion and the administrative areas of your club/group.

PROJECT/EVENT

The risks associated with a specific project, event or competition including all phases of the event. Safety, public liability, property loss/damage and competition/competitor services.

In establishing the context of the risk review, define the extent of the review; whether you want to limit it to certain aspects such as safety or public liability; or conducting the review looking at the entire project, event or competition.

Risk management strategy grid

Highest risk

Strategy = Avoidance and Management
e.g. Hang gliding – avoid program or provide qualified staff, close supervision and safe, regular inspected equipment and facilities.

High risk

Strategy = Management
e.g. Rock climbing­—provide qualified staff, close supervision and safe, regular inspected equipment and facilities.

Moderate risk

Strategy = Management
e.g. Injury occurring within the rules of the game. First aid training provided for volunteers, coaches and officials.

Moderate risk

Strategy = Insurance
e.g. Unable to fill executive positions in the club. Provide mentoring opportunities.

Lower risk

Strategy = Acceptance
e.g. Fluctuating club membership numbers.

Risk management template

PROJECT:

Describe the activity/function/strategy.
E.g. Financial management processes for the Association.

THE RISK:

What can happen? How it can happen?
E.g. Inadequate financial management processes and the Association becomes insolvent.

CONTROLS:

What controls will be used in this activity?
E.g. Monthly financial statements provided.

Excellent
Adequate
Inadequate

LIKELIHOOD:

What is the likelihood of this event occurring? To rate, see Table D1.
E.g. Likely.

CONSEQUENCES:

What would be the consequences if the event occurred? To rate, see Table D2.
E.g. High financial loss.

LEVEL OF RISK:

What is the level of risk? To rate, see Table D3. E.g. significant risk. 
Senior management action needed.

Risk assessment and acceptance table

TABLE D1 LIKELIHOOD: What is the likelihood of potential risk occurring?

Rare

The event may only occur in exceptional circumstances.

Unlikely

The event could occur at some time.

Moderate

The event will probably occur at some time.

Likely

The event will probably occur in most circumstances.

Almost certain

The event is expected to occur in most circumstances.

TABLE D2 CONSEQUENCES: What is the outcome of an event or situation?

Insignificant

No injuries, low financial loss.

Minor

First aid treatment, medium financial loss.

Moderate

Medical treatment required, high financial loss.

Major

Extensive injuries, major financial loss.

Catastrophic

Death, huge financial loss.

TABLE D3 LEVEL OF RISKS

LEVEL OF RISKS

Likelihood	Consequences
	Insignificant	Minor	Moderate	Major	Catastrophic
Rare	Low risk	Low risk	Medium risk	Significant risk	Significant risk
Unlikely	Low risk	Low risk	Medium risk	Significant risk	High risk
Moderate	Low risk	Medium risk	Significant risk	High risk	High risk
Likely	Medium risk	Significant risk	Significant risk	High risk	High risk
Almost certain	Medium risk	Significant risk	High risk	High risk	High risk

Risk management action plan

Actions

Tasks to reduce your club’s risk

When?

Set some dates

Who will do these tasks?

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