Group 4 Securicor

Risk Mitigation Strategies and Examples

A Private Sector View

Risk is defined as something happening

that may have an impact on the
achievement of objectives as this is most
likely to affect the service deliveryit
includes risk as an opportunity as well as a
threat
NAO
Managing Risks to Improve Public Services
Oct 04

Mindset

Senior leadership buy-in

Creating a culture
Training and practice
Checks and balances
Clear and defined SLAs

Category of Risk
External

Arising from the external environment, not

wholly within the organization's control but
where action can be taken to mitigate the
risks
Operational Relating to existing operations both current
delivery and building and maintaining
capacity and capability
Change

Risk created by decisions to pursue new

endeavours

Category of Risk

External

Political, economic, socio-cultural, technological, legal,

environmental

Operational

Capacity and capability, governance, reputational, delivery

(service/product failure)
Human Resources
Business Continuity
Security of physical assets and information

Change

Change programme
New products
New policies

Why Change?
Tangible Benefits

Deliver better services

Improve efficiency
Make more reliable decisions
Support innovation
Stay ahead of the competition
The UK Government announced in the Spending Review in
July 2004 its intention to achieve savings of 21.5bn a year
staff reductions of 84,000 and asset sales of 30bn by 2010
NAO
Managing Risks to Improve Public Services
Oct 04

Managing Risk
Identifying the risks and managing them is key:
Committed senior leadership
Identify and document the risks
Evaluate the risks using an agreed methodology
Select the risks to work on
Determine ways of reducing the risks
Review the risks regularly
Risk management means having in place a corporate and
systematic process for evaluating and addressing the
impact of risks in a cost effective way and having staff with
the appropriate skills to identify and assess the potential
for risks to arise
NAO
Managing Risks to Improve Public Services
Oct 04

What Next?
Acceptance

in its entirety
Prevention/Reduction (minimizing the impact and
reduction of the likelihood of the risk occurring)
Transfer to an insurer or sub-contractor
Rejection of the risk as being unacceptable

Experience
Two

examples, not comparisons

MNC Off-Shore project

Risks not fully identified
Cost of risk mitigation
Secure Training Facility
Creation of SPV
Identification and allocation of risks.
"What is the cheapest to you now is likely to be the dearest
to you in the end."
John Ruskin (18191900)

Off-Shore Relocation
An MNC relocated back-office operations and call centre from Hong
Kong to three off-shore locations in India and China. The migration
took 24 months to complete.
Failure

to correctly measure existing delivery & costs

Benchmarking success became untenable
Failure to identify processes suitable for relocation
Processes relocated to disparate geographies and needing
additional resources
Insufficient capability to deliver to existing service level
Increased management time spent answering customer
complaints
Negative impact on customers satisfaction
Initiative is unpopular; no benefit delivered to customer

Off-Shore Relocation
Resilience low due to complicated BCP support
All sites require back-up
Staff issues
Training, turnover & background checks
Loss of knowledge
Management team are disintermediated
Cost of compliance
Legal and Safety, Health & Environment
Operational Control
On-going project management, audit & monitoring
Security of information
Increased access

These lessons were learnt resulting in a happy ending

Secure Training Centre

Milton Keynes

A PFI prison for 80 juveniles procured by the Youth Justice

Board (YJB) under a DCMF (design, construct, manage,
finance) contract with a 25 year duration.

A Special Purpose Vehicle (SPV) set up as the contracting

entity by the consortium partners (the construction
company, operating company and an equity investor)

Secure Training Centre

NATURE OF RISK

DESIGN SUITABILITY
CONSTRUCTION COST OVERRUN
DELAY IN OPENING
VOLUME RISK
SERVICE FAILURE
SERVICE COST OVERRUN
INSURANCE RENEWAL
LIFE CYCLE RENEWAL
FUNDING
INFLATION
GENERAL LEGISLATIVE CHANGE
SPECIFIC LEGISLATIVE CHANGE

PUBLIC
SECTOR

SPECIAL
PURPOSE CO

CONSTRUCTION
COMP ANY

OPERATIONS
COMPANY

Lessons Learnt

Innovation, especially in recruitment and deployment of

staff
Development of relevant SLAs
Decency agenda
Public sector service quality improvement
Competitive pricing affecting service delivery

Summary
Outsourcing does work, but risks must be:

Made Explicit
Quantified
Leadership commitment
Risk management culture
Partnership

= improved services

An outsourcing agreement is not an

opportunity to cut a proportion of a
companys cost base and offload it to
someone else. It is a partnership in which
both sides remain responsible for the
delivery of service.
FT Article 24/8/05
British Airways lesson on how not to outsource
J. Fitzgerald