Social Enterprise Learning Toolkit (Risk Management Module)

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Risk Management for Social Enterprise

An enp Strengthening Your Skills workshop

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Workshop Objectives

At the end of this workshop, you will be able to:

1 Understand what constitutes a risk and/or an opportunity.

2 Apply the process of managing risk.

3 Use the tools and techniques to support risk management in your social enterprise.

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Risk Management is an integral part of managing a sustainable social enterprise

Source: www.enterprisingnonprofits.ca/learning-toolkits

Social Enterprise Learning Toolkit

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Where are you along the Social Enterprise Development Path ?

Social Enterprise Development Path

Opportunity IdentificationOpportunity Identification

Business Plan

Business Plan Start-UpStart-Up StrengtheningStrengthening

Organizational Readiness

Organizational Readiness

Feasibility Study

Feasibility Study EvaluationEvaluation

Source: The Canadian Social Enterprise Guide (2nd edition)

Launch Preparation

Launch Preparation

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What is a risk?

A risk is anything that might happen and that, if it did happen, would have an impact (+/-) on the ability of a social enterprise to accomplish its mission.

A risk is anything that might happen and that, if it did happen, would have an impact (+/-) on the ability of a social enterprise to accomplish its mission.

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What is Risk Management?

Risk Management is a process that enables a social enterprise to cope with uncertainty by taking proactive steps to protect its assets & resources.

Risk Management is a process that enables a social enterprise to cope with uncertainty by taking proactive steps to protect its assets & resources.

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Why manage risk?

The benefits of Risk Management• identifies risks and opportunities not already

considered• effectively constrains risks to acceptable levels• informs decisions about exploiting

opportunities• increases stakeholder confidence in achieving

desired outcomes

The benefits of Risk Management• identifies risks and opportunities not already

considered• effectively constrains risks to acceptable levels• informs decisions about exploiting

opportunities• increases stakeholder confidence in achieving

desired outcomes

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How do you manage risk?

Identify Risk

Identify Risk

Assess Risk

Assess Risk

Manage Risk

Manage Risk

Review & Report RiskReview &

Report Risk

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Identify Risk

Identify Risk

Assess Risk

Assess Risk

Manage Risk

Manage Risk

Review & Report RiskReview &

Report Risk

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5 Types of Risk

• People• Property• Liability• Income• Compliance

• People• Property• Liability• Income• Compliance

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People

• Workplace injuries• Death, disability, retirement• Resignation• Disengagement

• Workplace injuries• Death, disability, retirement• Resignation• Disengagement

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Property

• Partial or total loss of premises• Theft of equipment, inventory, cash,

information • Intellectual property compromised• Brand & reputation damaged

• Partial or total loss of premises• Theft of equipment, inventory, cash,

information • Intellectual property compromised• Brand & reputation damaged

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Liability

• Injury to clients, general public• Product liability• Damage to property of others• Breach of contract • Professional liability

• Injury to clients, general public• Product liability• Damage to property of others• Breach of contract • Professional liability

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Income

• Loss of grant funding• Revenue shortfalls• Fire, floods, natural disasters • Change in market conditions

• Loss of grant funding• Revenue shortfalls• Fire, floods, natural disasters • Change in market conditions

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Compliance

• Laws & regulations - knowing what applies to your social enterprise

• Legal responsibilities of employers• Workplace health & safety• Human Rights • Privacy

• Laws & regulations - knowing what applies to your social enterprise

• Legal responsibilities of employers• Workplace health & safety• Human Rights • Privacy

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5 Types of Risk SummaryPeople Property Liability Income ComplianceWorkplace injuries

Partial or total loss of premises

Injury to clients, general public

Loss of grant funding

Laws & regulations - knowing what applies to your social enterprise

Death, disability, retirement

Theft of equipment, inventory, cash, information

Product liability Revenue shortfalls

Legal responsibilities of employers

Resignation Intellectual property compromised

Damage to property of others

Fire, floods, natural disasters

Workplace health & safety

Disengagement Brand & reputation damaged

Breach of contract

Change in market conditions

Human Rights

Professional liability

Privacy

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Identifying Risk

Sample case studies:

• Do Good Landscaping

• Cool Threads Thrift Store

Activity Activity 11

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5 Types of Risk

• People• Property• Liability• Income• Compliance

• People• Property• Liability• Income• Compliance

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Identifying Risk

• Types of exposures• Get input from many stakeholders – board,

managers, staff, clients, partners and suppliers• Use external facilitation/resources if possible• Own the process

• Types of exposures• Get input from many stakeholders – board,

managers, staff, clients, partners and suppliers• Use external facilitation/resources if possible• Own the process

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Surveys,Questionnaires

Surveys,Questionnaires

Identifying Risk - Sources

Financial StatementsFinancial

StatementsRecords &

FilesRecords &

Files

ContractsContracts FlowchartsFlowcharts Facility Inspections

Facility Inspections

• .

• .

• .

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Identify Risk

Identify Risk

Assess Risk

Assess Risk

Manage Risk

Manage Risk

Review & Report RiskReview &

Report Risk

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Probability

Impact

1Extremely unlikely

2Likely

3 Extremely

likely

1 Not critical 1 2 3

2 Significant 2 4 6

3 Fundamental to continuing operations

3 6 9

PriorityLowMediumHigh

Impact x Probability = Risk score

Assessing Risk

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Assessing Risk

Consider the risks that face your own social enterprise, or one with which you are familiar:

•Identify 3 risks that the organization faces

•Use the simple matrix on the next slide to give them scores and determine the levels of risk

Activity Activity 22

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Impact x Probability = Risk score

Risk Assessment Matrix

Activity Activity 22 Probability

Impact

1Extremely unlikely

2Likely

3 Extremely

likely

1 Not critical 1 2 3

2 Significant 2 4 6

3 Fundamental to continuing operations

3 6 9

PriorityLowMediumHigh

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Identify Risk

Identify Risk

Assess Risk

Assess Risk

Manage Risk

Manage Risk

Review & Report RiskReview &

Report Risk

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Accept

The risk may be acceptable without any further action being taken. The ability to do anything about some risks may be limited, or the cost of taking any action may be disproportionate to the potential benefit gained.

TreatMost risks will be addressed in this way. Actions are taken to mitigate the impact and/or probability of the risk to an acceptable level.

TransferFor some risks the best response may be to transfer them for example, by taking out insurance. Some risks are not (fully) transferable – e.g. reputational risk.

Avoid Some risks will only be treatable eliminating the source of the risk.

Take the Opportunity

This is not an alternative to those above but an option which should be considered whenever accepting, transferring or treating a risk. Do circumstances arise which offer positive outcomes?

Managing Risk – 5 Strategies

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Identify Risk

Identify Risk

Assess Risk

Assess Risk

Manage Risk

Manage Risk

Review & Report RiskReview &

Report Risk

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Reviewing and Reporting Risk

• Why review and report?• Frequency of review• Who “owns” the risk

• Why review and report?• Frequency of review• Who “owns” the risk

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Description of Risk

Probability (Low/Med/High)

Impact (Low/Med/High)

Rating (score)

Risk Owner

Strategy to deal with Risk – (accept, treat, transfer, avoid, take the opportunity)

Cost $

Cost Time

Frequency of Review

Re-assessor

Risk Register

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Create a Risk Register

For each of the 3 risks that you identified in Activity 2:

•Complete the table on the previous slide (you can download the worksheet).

For your own organization you will need to do this for each of the risks, producing a risk register.

Activity Activity 33

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How/when to adjust your Risk Management plan

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• User Guide & Glossary • Risk Types Chart• Risk Management techniques chart• Risk Assessment matrix• Risk Register

Tools and templates you can download

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Take action – your next steps!

• Use the risk management process to produce a risk register for your social enterprise.

• Download and use the tools and templates provided.

• Review and update your risk register regularly as part your ongoing management practices!