Identifying Risk

Organisational Risk

Managing risk is not crisis management. It requires thinking proactively about what risks may arise. There are many such risks.

Risks may be internal or external and include legal, economic, contractual, operational, and political risk.

Organisations should have a range of risk management policies and plans to reduce the:

  • Likelihood of the risk occurring
  • Consequences of the risk.

Ask the funding body if they want this information in your application. Attach your risk management policies as appendices or a link. 

Program and Project Risk

Risk management is a formal part of contract management. It takes resources to develop and maintain.

Planning for Risk

Risk management plans are formal, written documents which:

  • Provide information about potential risks (category, probability and impact)
  • Allocate staff roles and responsibilities for monitoring, controlling, and reporting
  • Outline the plan for reducing risk occurrence and impact.

Risk Mitigation

Processes involved in risk mitigation include:

  • Identifying the risk/s
  • Assessing the probability, nature and scope
  • Developing plans to respond to the risk, for example:
    • Contingency plans are predefined actions if an identified risk event occurs
    • Fallback plans are developed for risks that have a high impact on meeting project objectives, and are implemented if attempts to reduce the risk are not effective
    • Contingency reserves or allowances held by the project sponsor or organisation to reduce the risk of cost or schedule overruns to an acceptable level.

Develop a Risk Management Plan

To manage the risks inherent in your proposal, it is necessary to develop a risk management plan which monitors, controls, and reports on risk.

  • Create a risk register (see Activity 6.4.1 or use an Excel spread sheet) to help you identify project risks, analyse risk severity and document possible solutions.
  • USE the risk registers to better manage risks
  • Clearly describe the activities you will undertake
  • Identify how you will manage changes in scope throughout the contract period
  • Identify what may cause a risk to eventuate
  • Develop appropriate responses to risky situations
  • Analyse the level of risk tolerance accepted by the funding body.

Failure to manage risk may negatively impact:

  • The services provided to the community
  • Your relationship with the funding body
  • The long term sustainability of your organisation. 

The most common project risks are detailed in the table below.

Common Project Risks
Type of Risk Managing or Reducing Risk

Scope risk

Scope risk eventuayes when the boundaries of your project are not clearly defined. The scope of your application is defined by your:

  • Objectives 
  • Goal
  • Phases
  • Tasks
  • Resources
  • Budget
  • Schedule
  • Limitations and parameters (e.g., you only provide counselling to men aged over 18 but workers start seeing anyone who presents at your clinic).

Defined deliverables or performance indicators, objectives, activities, consumers, geographic area, and hours of operation are clearly communicated to stakeholders, senior management and team members.

Objectives are tangible and reflect your organisational objectives.

Cost risk

The costs which you have provided in your budget may be affected by internal and external factors (e.g., increases in salaries; increases in utility/transport costs).

 

Make sure you clearly specify the resources and materials needed.

If the contract period is long, factor in increases for fluctuating costs.

When providing estimates for material expenses, use the upper estimates.

Include a contingency amount.

Prepare an exhaustive budget with line items for your proposal.

Establish good accounting procedures.

Schedule risk

Scheduling phases and activities enables:

  • You to manage changes throughout the contract period
  • Goal setting and the development of critical paths
  • Clarity in reporting requirements.

Achieving timelines and agreed critical paths may be difficult if there is extensive reliance on external parties or materials.

To minimise schedule risks:

  • Break down the flow of activities into small, clearly defined components
  • Allocate relatively short timeframes for each component.

When formulating the critical path, ensure that holidays are built into the equation.

Wherever possible, include projected periods of high demand.

Performance risk arises when activities fail to produce anticipated results and/or there is a failure to complete an activity on time.

Make objectives tangible, feasible, and credible.

Construct a schedule to identify priority activities.

Identify potential red tape impediments (e.g., financial approvals) that may impact on the performance of your activities.

Governance and decision risk usually occur where an organisation's governance and decision-making structures are not clearly articulated or communicated to staff, funders, consumers and the community.

 

 

 

 

Develop a governance model for your proposal which describes the roles of team members and decision-making process.

Describe the ground rules for participation in the program and the processes for sharing information with the rest of the organisation.

Be specific about the commitment expected from Board members, external stakeholders, and team members.

Strategic risks may result from:

  • Choosing a technology which does not work for outreach services
  • Proposing activities that are inflexible and/or inaccessible to consumers
  • Not being able to secure infrastructure support or cooperation from other parties to successfully execute your proposal.

Clearly state how the proposed services will be provided and highlight the beneficial outcomes for consumers. 

Conducting a community needs assessment and a review of the program/service you are implementing will help you to minimise any feasibility or design risks.

 

Legal risk: Alcohol and drug organisations may encounter many legal and regulatory obligations, as well as contract risks.

Your organisation's policies and procedures may need to be adapted to reduce legal risk.

Make sure these policies and procedures are continuously reviewed and implemented for all activities and program.

Environmental risks are risks associated with external hazards, including storms, floods; earthquakes; vandalism.

Organisations have little control over environmental risks.

Ensure your organisation has adequate insurance cover.

Resource risk

Resource issues such as staff turnover and inadequate access to education, training and professional development are common risks. There is always a risk that your key experts or senior staff will leave and that your team are inexperienced or need to acquire new skills.

In addition, you may need to invest in new materials, technology, or resources to replace outdated or unreliable equipment

Develop policies and procedures to manage organisational and staff changes.

Estimate costs accurately.

Do not place undue expectations on the capacity of the staff to undertake the proposed activities.

Ensure any contracted and/or collaborative work is clearly defined in contracts and memoranda of understanding.

Ensure sufficient funds have been requested for:

  • Training and professional development
  • New materials and technology required to conduct the proposed work.

Interpersonal conflict risk: Conflict management may arise with a number of internal and external stakeholders throughout the development of the funding application.

Develop conflict management strategies and train staff in conflict management techniques.

If you are having difficulty in developing risk management plans for your program or service, consult similar agencies, advocacy groups, or a professional service to develop such a plan. Consulting a professional service may involve a development cost and then a yearly review.


References & Resources

 


Activities

Complete the activities below by en​tering text into the fields provided and/or completing the attached documents. If you download and complete an attached document, you will have to save this to your personal file.

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Activity 6.4.1 Identify and Manage Risks

List all the possible risks associated with your proposal.

Consider the likelihood and consequences of the risks eventuating.

Develop a plan to reduce the chances of any risk which may impact the successful delivery of your proposal. Plan how you can either prevent the risk from eventuating and/or develop strategies to reduce the impact of the risk if it does occur.

Develop a risk register and assign responsibility to a staff member to ensure the risk is monitored and managed. See the attached table for an example of how to develop a risk register.

Section_6.4_Activities.pdf (106 KB)

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