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What does Risk Management mean in an RTO?
Risk Management is an area that we often find is misunderstood across the VET sector. Risk Management plans and Risk Registers are rare finds, and if they do exist they are often not up to date or truly reflective of the whole Registered Training Organisation operations.
Managing risk is the daily task of every RTO manager regardless of the size of your RTO. And whilst we know that you have many other things to juggle every day, we encourage you to do the work related to identifying and managing risk upfront, before anything happens. It will make the daily task of managing risk must more achievable because you will have plans and systems in place to minimise risk and reduce the impact if things do occur.
What does “risk management” mean in the VET environment?
From the perspective of the regulator, determining risk is about measuring the compliance posture of the RTO, or in other words determining the risk of the RTO failing to meet their obligations and delivering poor quality training outcomes. The risk factors that are considered fall into 3 general categories. The first category are performance related risk factors – including complaints and noncompliance at audit. The second category relates to governance and includes stability of management, length of registration & breadth of revenue sources. And finally the third category relates to the profile of the RTO. This relates to factors such as whether you deliver to overseas students, deliver outside Australia, deliver in multiple venues and offer qualifications that lead to occupational licences.
These risk factors are assessed and all RTOs are assigned a low, medium or high risk rating. The higher the risk rating the more scrutiny the RTO will receive.
But this focus of risk is only one aspect of risk management in an RTO. Let’s now look at risk from the RTO perspective. What areas come to mind when you consider what risks are associated with operating your RTO? Top of mind might be issues like workplace health and safety, building safety or financial viability. These are valid risks within the operations of an RTO but are only part of the overall risk management picture.
Linking risk management with educational vision & strategic plans
Does it make sense to you to link the term risk management with the phrase ‘realisation of our educational vision & strategic plans’? It should, because the reputation of your RTO and the success of the organisation now and into the future should be the focus of your strategic thinking and planning activities and should be subject to ongoing risk assessment and management.
The Basics of Risk Management
Risk can be defined as the chance that an event or action could happen that may have an adverse impact on the achievement of goals or objectives. It is measured in terms of the likelihood of the event occurring and the consequences if it did. Risk Management is an essential part of good management practice. The Australian/ New Zealand standard AS/NZS ISO 31000:2009 Risk Management— Principles and Guidelines provides a guide for managing risk. This standard lays out the process for identifying, analysing, evaluating and treating identified risks and the ongoing monitoring of the risk management process to ensure changes made are beneficial for the school.
The basics of a risk management process include: establishing the context of the risk; identifying potential risks; analysing and evaluating the risks; determining the treatment options; developing a risk management plan and monitoring and reviewing the plan.
To manage potential threats to the realisation your vision, you should identify a set of key risk areas that you need to manage. Commonly, RTOs include the following types of categories in their risk management systems:
- Financial resources including cash and the capacity to generate income
- Legal and regulatory compliance
- Operational risks such as using equipment & machinery
- Student welfare
- Staff welfare
- Physical resources such as buildings & facilities, equipment, furniture, resources
- Governance and leadership
You can see from this list, as an RTO manager you are making judgements and managing these types of risks every day whilst at the same time making decisions that impact on the short term and long term goals of the RTO – even if you don’t realise it!
Risk Management and the Educational Vision
Linking risk management processes to the implementation of your educational vision & strategic plans will strengthen your capacity to achieve your plans. Framing your strategic thinking and planning processes with a risk management process can be done as follows:
Step 1: Establish the context
You can establish the context for your risk management plans and confirm your educational vision and strategic plans by conducting a number of analyses.
- Look inside and outside your RTO for feedback on your current practices. e.g. Are you achieving the excellent education outcomes you are aiming for? What are your student needs and are the demographics consistent, changing etc? How will this impact on you in the future?
- Examine trends in vocational education, threats to your current situation, and ideas for the future. e.g. What is happening in industry or the VET sector and what are the national priorities for vocational education that will impact you in the future?
- Benchmark your performance against a range of competitors e.g. Who are your main competitors and what are their strengths and weaknesses?
- Determine your positioning in the market e.g. From your in-house analysis and your competitor analysis, is your current positioning appropriate or should you aim to change?
- What resources will you need e.g. What are your human resource requirements – what workforce planning is required?
- What facilities and property will you need to enable fulfillment of your vision? What financial position are you in with regards to property acquisition?
Step 2: Identify risk, analyse and evaluate risks and determine treatment options
Once you have identified what you believe to be your educational vision and strategic priorities ask the following questions to assist in identifying risks:
- What might happen? What are the key threats to your vision and future plans? What would the impact be? What controls are currently in place?
- How could this happen?
- When could this happen? During the activity? Before or after the activity?
- Who could be impacted? Who is involved?
- Why could this happen? Consider triggers and causal factors.
You may wish to use a scenario planning approach at this stage to help consider options for the future. This is a useful way to engage staff in discussion about the risk assessment conducted and the data you have gathered.
Analyse each of the identified risks by determining the likelihood of the event occurring and the consequence if it did happen. As a result of this analysis you can prioritise your risks and go back to your planning process to ensure you have plans in place to manage and monitor risks according to the risk rating and priority.
You have a number of options when deciding how to treat the identified risks. The hierarchy below can help you choose an appropriate course of action. You can either:
- Avoid the risk. e.g. stop the activity, contract the task out to an expert
- Reduce the likelihood of the risk. e.g. use a less hazardous approach, delay the start of a project until you are better prepared.
- Reduce the consequences of the risk. e.g. provide thorough instruction and training
- Share the risk. e.g. get insurance cover, make sure you have the right resources in place e.g. you may need to contract another organisation to complete tasks, partner in a project
- Retain the risk and go ahead with the idea/project.
Step 3: Develop a risk management plan and monitor and review the plan
Once your analysis and prioritising is complete you can complete your planning process by building in key performance indicators, allocating responsibilities and planning resourcing strategies to ensure that you can work towards achieving your vision and effectively monitor progress and adjust your approach along the way. This is often the part that gets overlooked in RTOs. Your risk management activities will only be effective if you regularly monitor your plan and keep thorough records.
We’re here to help
Here’s a few ways we can help you with your Registered Training Organisation Risk Management
1. FREE LIVE WEBINAR
- If you’re reading this before Aug 20, 2014 you can join us on a free webinar. Sign up here
- If you’re reading this after Aug 20, 2014 you can see the recording of the webinar here. Or if it’s no longer there, you can purchase it here.
2. RESOURCES & PRODUCTS: We have developed custom resources to help RTOs. Here’s a few that are relevant to Risk Management
- Risk and Compliance Policy Pack – you can find it here
- RTO Compliance Webinar & Policy Pack – you can find it here
- If you would like help to set up an effective risk management approach in your RTO or to discuss any other matter related to your RTO functioning, please contact us on firstname.lastname@example.org
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