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Similar to Strategic Risk: Linking Risk Management & Strategy Management processes
Strategic Risk: Linking Risk Management & Strategy Management processes
- 1. • The StrategyNetwork is an open network for professionals with interest and knowledge in strategy • We meet around three times a year in order to share best practice and exchange knowledge around strategy • More than 40 top companies in South Africa have joined • No commitment, no fees. Confirmation of attendance is sufficient (Subject to availability) Both free and priceless at the same time
- 2. Strategic Risk:Strategic Risk: LinkingRisk Management &Linking Risk Management & Strategy Management processesStrategy Management processes Strat.exe has the pleasure to invite you to an executive breakfast with Wasfie Ismail, Group Manager - Strategic Planning at ACSA
- 3. Sections 1 Introduction 2 Challenge:Linking Strategy & Risk Processes 3 Global risk approach 4 Strategic risk management 5 Linking strategy to risk example 6 Q & A
- 4. Primary activities andRevenue streamsPrimary activities and Revenue streams Aeronautical Non-Aeronautical Concession agreements Retail Car rental Advertising Car parking Property International Equity Management contracts Technical consultancy Passenger service charges Aircraft landing fees Aircraft parking fees.
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- 6. Key Indicators (12/13Financial Year)Key Indicators (12/13 Financial Year)
- 7. Sections 1 Introduction 2 Challenge:Linking Strategy & Risk Processes 3 Global risk approach 4 Strategic risk management 5 Linking strategy to risk example 6 Q & A
- 8. CE v5.5 Strategic Planning– ProcessStrategic Planning – Process Balanced ScorecardBalanced Scorecard Step 1 Executive Committee Strategy & Board Strategy scheduled by Company Secretariat during period of August – October Step 2 The Managing Director, engages the Chair of the Board on salient strategic issues (July – August) Step 3 The Managing Director, in conjunction with, Financial Director finalises the EXCO Strategy agenda (July – August) Step 4 The EXCO Strategy Session invite extended to members of the EXCO, and at times, additional senior management (July – August) Step 5 The Strategy Session, invariably but not limited to, covers strategic related matters. The discussions, outcomes and principles are established and consolidated for the Strategic / Business / Corporate Plan (August - September) Step 8 Business and Support Units prepare and submit strategic summaries for their respective units to the Strategic Planning Dept (September – October) Step 7 The Board Strategy Session invite and agenda extended to Board, EXCO, and on request, additional senior management & other guests (September - October) Step 9 At the Board Strategy, the MD will present the summary strategic outlook. In turn, the Board will engage the MD, FD and Exco on inputs to the Plan (September - October) Step 10 Draft Plan submitted to Exco in October, afterwards to Treasury & Econ Reg Board and to Main Board in November for review. The final plan to be approved January – February. By end of February (PFMA) the plan is submitted to Dept. of Transport and Treasury Integrated Strategic Risk Management
- 9. Integrated Risk ManagementProcessIntegrated Risk Management Process ISO 13000ISO 13000
- 10. Sections 1 Introduction 2 Challenge:Linking Strategy & Risk Processes 3 Global risk approach 4 Strategic risk management 5 Linking strategy to risk example 6 Q & A
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- 12. Source: James Creelman Risks– the obvious & the hiddenRisks – the obvious & the hidden Known UnknownsKnown Unknowns Operational Eg Fraud & Theft Known UnknownsKnown Unknowns Operational Eg Fraud & Theft Unknowns UnknownsUnknowns Unknowns Externally Generated Eg 9/11, financial meltdown Unknowns UnknownsUnknowns Unknowns Externally Generated Eg 9/11, financial meltdown Known KnownsKnown Knowns Governance and Compliance Eg Controls Known KnownsKnown Knowns Governance and Compliance Eg Controls
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- 14. Risk universeRisk universe Input Strategic Objective WHY WHATHOWInitiative/action If we do not achieve this objective => what could happen? What can go wrong in this Initiative/action? What can be the consequence? A B Output Strategic Objectives
- 15. Sections 1 Introduction 2 Challenge:Linking Strategy & Risk Processes 3 Global risk approach 4 Strategic risk management 5 Linking strategy to risk example 6 Q & A
- 16. CE v5.5 Strategic riskmanagement processStrategic risk management process Risk Identification “A – What ” Risks or “B – How” Risks Risk Description Existing Controls Current Risk Rating Rating Risk Treatment Target Date Risk Treatment Owner Something occurs…, leading to …. Mitigating factors and action plans Assess Consequence & Likelihood Risk Rating Computed Identify additional actions Sell by date, Exco & Board Accountability Assigned
- 17. CE v5.5 Strategic riskmanagement processStrategic risk management process Risk Identification “A – What ” Risks or “B – How” Risks
- 18. CE v5.5 Financial A1 DeliverLong Term Profitability A2 Control funding & cost of borrowing Stakeholders Internal Processes E1 Ensure succession planning Shareholders S1 – Entrench and deepen stakeholder relationships P8 – Continually re- engineer and align business operations processes (Core & Support BU’s) P10 – Leverage IT for competitive advantage P9 – Inclusive infrastructure capacity management planning and phased development Identifying and securing new business Strengthen business excellence Learning& Growth Build win-win partnerships with all stakeholders Managing and developing a high performing & engaging team E2 Manage talent E3 Strengthen culture Deliver shareholder value Acceleration of sustainability and transformation programs P1 Finalise economic regulation legislation Finalisation of economic regulatory legislation & funding framework P2 Agree on funding framework Management P3 Good governance Enterprise Development P4 Social responsibility P5 Environmental accountability P6 Economic efficiency Skills Development Employment Equity Preferential Procurement P7 – Enhance return (Identify, evaluate and secure new business) Employees Investors / LendersDpt of Transport (Policy) SA Gvt Economic Regulator Airlines Passenger Communities Regulatory & Licensing bodies Tenants & Concessionaires Consumers S2 – Deliver airport service quality for the passengers Socio Economic development
- 19. CE v5.5 Strategic riskmanagement processStrategic risk management process Risk Identification “A – What ” Risks or “B – How” Risks Risk Description Something occurs…, leading to ….
- 20. CE v5.5 Strategic riskmanagement processStrategic risk management process - Risk description- Risk description Strategic Objectives Generally when we will describe a risk we will say: “SOMETHING MIGHT HAPPEN… LEADING TO… CAUSED BY….”
- 21. CE v5.5 Strategic riskmanagement processStrategic risk management process Risk Identification “A – What ” Risks or “B – How” Risks Risk Description Existing Controls Something occurs…, leading to …. Mitigating factors and action plans
- 22. Strategic risk managementprocessStrategic risk management process –– control effectivenesscontrol effectiveness Score Rating Description 1 Critical improvement opportunity Controls and/or management activities are non-existent or have major deficiencies and don’t operate as intended 2 Significant improvement opportunity Limited controls and/or management activities in place, high level of risk remains 3 Moderate improvement opportunity Key controls and/or management activities in place, with moderate opportunities for improvement identified 4 Limited improvement opportunity Controls and/or management activities properly designed and operating, with opportunities for improvement identified 5 Effective Controls and/or management activities properly designed and operating as intended
- 23. CE v5.5 Strategic riskmanagement processStrategic risk management process Risk Identification “A – What ” Risks or “B – How” Risks Risk Description Existing Controls Current Risk Rating Something occurs…, leading to …. Mitigating factors and action plans Assess Consequence & Likelihood
- 24. Risk management processRiskmanagement process –– Likelihood criteriaLikelihood criteria Score Rating Percentage 5 Expected > 85% 4 Highly likely 55 - 85% 3 Likely 25 - 54% 2 Slight 5 - 24% 1 Not likely <5%
- 25. Strategic risk managementprocessStrategic risk management process –– consequenceconsequence Level Relative Impact 1 Insignificant 2 Minor 3 Moderate 4 Major 5 Catastrophic
- 26. CE v5.5 Strategic riskmanagement processStrategic risk management process Risk Identification “A – What ” Risks or “B – How” Risks Risk Description Existing Controls Current Risk Rating Rating Something occurs…, leading to …. Mitigating factors and action plans Assess Consequence & Likelihood Risk Rating Computed
- 27. Strategic risk managementprocessStrategic risk management process –– ratingrating Catastrophic 5 II I I I I Critical 4 II II I I I Significant 3 III II II I I Moderate 2 III III II II I Minor 1 III III III II II 1 2 3 4 5 Slight Not Likely Likely Highly Likely Expected Consequences Likelihood
- 28. CE v5.5 Strategic riskmanagement processStrategic risk management process Risk Identification “A – What ” Risks or “B – How” Risks Risk Description Existing Controls Current Risk Rating Rating Risk Treatment Target Date Risk Treatment Owner Something occurs…, leading to …. Mitigating factors and action plans Assess Consequence & Likelihood Risk Rating Computed Identify additional actions Sell by date, Exco & Board Accountability Assigned
- 29. CE v5.5 Sections 1 Introduction 2Challenge: Linking Strategy & Risk Processes 3 Global risk approach 4 Strategic risk management 5 Linking strategy to risk example 6 Q & A
- 30. CE v5.5 FinancialStakeholders Internal Processes Identifying andsecuring new business Strengthen business excellence Learning& Growth Build win-win partnerships with all stakeholders Managing and developing a high performing & engaging team Deliver shareholder value Acceleration of sustainability and transformation programs Finalisation of economic regulatory legislation & funding framework P7 – Enhance return (Identify, evaluate and secure new business) A1 Deliver Long Term Profitability
- 31. CE v5.5 ExampleExample CURRENT STATEFUTURE STATE A1 Deliver Long Term Profitability DO NOTHINGDO NOTHING WHWH YY P7 – Enhance return (Identify, evaluate and secure new business) P7 – Enhance return (Identify, evaluate and secure new business) HOWHOW Identify New Opportunities Too Many; Too Little;Too Many; Too Little; Unknown ROIUnknown ROI Desktop Viability Analysis All things equal will it deliver WACC + 3% Insufficient funding,Insufficient funding, Inadequate resourcesInadequate resources Due Diligence • Approval • Affordability • ROI to ROCE • Sovereign risks • Cultural • Resources • Ability to deliver IncompleteIncomplete Business CaseBusiness Case Secure new business • MOU • Shareholding • Management / Operations agreement • Voting rights • Schedule of deliverables Unclear/AmbiguousUnclear/Ambiguous AgreementsAgreements Board Approval & Operationalisation ““A – WhatA – What”” RisksRisks Fail to secure additional valueFail to secure additional value Erode shareholder valueErode shareholder value ““B –B – HowHow ““ RisksRisks
- 32. Sections 1 Introduction 2 Challenge:Linking Strategy & Risk Processes 3 Global risk approach 4 Strategic risk management 5 Linking strategy to risk example 6 Q & A
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