Recession Toolkit - Operational Risks

Examples of operational risks include:

Service quality and development

The organisation may find that it is not providing a quality service; this could come to light as a result of beneficiary complaints, loss of contracts or funding, damage to reputation, etc. The organisation should do the following to reduce the likelihood or impact:

• implement a thorough complaints procedure.
• implement quality control procedures and checks.

Demand for services

The organisation may need to look at the services it offers and see if they can be provided in alternative ways. Questions that should be considered include:

• Is your area of work one in which demand for services is likely to rise in a recession, eg housing, mental health, debt or benefit advice, etc?
• Do you have the resources and capacity to provide increased services in terms of staff and programme costs?
• Could you make greater use of volunteers?
• Are your current services provided under a contract which specifies who can and cannot access the services or uses a specific statutory referral process? If so, is there a chance statutory agencies might redefine need to make your services available only to a narrower group of people in circumstances of reducing government spending?
• If so, could you still provide access to new service users?

Contract risk

With the increasing level of voluntary and community sector service provision, there is an increased risk to the organisation. For example, there may be onerous contract terms, or the service provision may not comply with the organisation's objectives. Examples of actions the organisation could take to prevent against these risks or reduce their harm may include:

• cost/project evaluation procedures.
• professional advice could be sought.
• performance monitoring.
• insurance could be purchased where a level of risk is necessary.

Employment issues

These could include health and safety issues, staff training, child protection, low staff morale, claims for injury, discrimination, etc. There is a variety of ways in which the organisation can reduce the likelihood of the risk or the severity of it. Some examples include:

• review the recruitment process (job description, contracts, etc) and supervision and appraisal procedures.
• job training and development.
• health and safety training and monitoring.
• staff vetting.

Planning and budgeting

Focus on your mission, concentrate on your core business and make sure your organisation is doing what it is best at. Do you have a strategic and operational plan? Are objectives within the plans linked to actions and targets associated with your budget process?

Plan for the future - rapid economic change can provide opportunities as well as threats. Ensure your organisation thinks about what is coming up and plan accordingly. Assume that all sources of income will be under pressure, whilst there are likely to be more demands on resources so budgets and business plans should be reviewed. Consider how you will respond to a further deterioration in conditions, rather than being forced to review options in the face of adversity, when panic decisions may result.

Staffing

Keep staff motivated - It is vital that you communicate regularly and honestly with your staff. Involve them in coming up with possible solutions to the problems. Do you have the appropriate procedures in place to ensure staff are treated decently if job losses are inevitable? Your circumstances may mean that you are considering redundancies. Are you aware of:

• circumstances in which you can make redundancies?
• any possible alternatives such as restructuring?
• the process of notification and implementation?
• the consequences of not applying with employment law?

Consideration of reducing staff costs

You may need to consider reducing staff costs by reducing salaries and terms - for example detaching from previously guaranteed annual pay rises linked to some external index such as the rate negotiated by NJC. In the first instance an employer should consult with the employees concerning the proposed changes with a view to reaching agreement. This could include consultation with employee representatives, eg, trade union representatives, representatives of any relevant information and consultation forum, or individual employees - where there are no representative structures.

If you do have to reduce terms, or give smaller cost of living increases than previously, pay great attention to and promote your 'total reward package' which includes all the things that employees value which go beyond substantive benefits, including: interesting and challenging work with clear goals and standards, an enabling environment, the values of the organisation, opportunities for development and growth, and good work life balance.

Skills - don't cut the training budget

During a recession avoid cutting training and development activity more than is absolutely avoidable. By having the right staff with the right attitude and skills, any organisation can successfully weather hard times. Staff are your capability to innovate and to transform short-term adversity into long-term opportunity and advantage. If you can't afford to pay so much to external trainers, look at training some of your in-house stars to deliver training and coaching to their colleagues, or other creative and less expensive ways of facilitating the ongoing learning and development of staff.

You will maintain motivation and morale during hard times if you have excellent managers operating sound and transparent line management processes. This is achieved through well-designed and consistent leadership and management training and by holding managers accountable for their performance in people management.

Above all, during hard times, as employers we should all strive even more than usual to be open, honest, fair and decent with all our staff. In times of big insecurity, the little things really matter. Make sure all your messages and actions reinforce how much you value your people.

Lack of policies and procedures

Clear, adequate, appropriate and enforceable policies and procedures define what an organisation does and how it does it. They are key to having a stable organisation. Without them the organisation risks actions being taken without authority and inconsistency in the organisation. To mitigate risks in this area the organisation should:

• ensure proper policies and procedures are recorded and used.
• review existing policies.

[See also NICVA's Human Resources materials for examples of polices and procedures.]