noun: risk management; (in business) the forecasting and evaluation of risks together with the identification of procedures to avoid or minimize their impact.
Risk Management for businesses is the process of identifying risks, planning on ways to mitigate / reduce the risk and ensure that they are able to operate effectively within their identified parameters.
Risk Management for the arts and for events is crucial, as often we experience challenges or eventualities that can be hard to foresee and plan for…. Think of the tour bus that breaks down and the cast can’t make the show, the electricity goes off, your lighting tech doesn’t show up or even your ticketing system is offline for the evening of your show.
Risk management is not about trying to stop these sometimes unavoidable things from happening, rather is about how to manage, mitigate and reduce the impact of these risks. Crucially, Risk Management is about having a plan of how to deal with situations should they arise and about adequate planning to minimise the occurrence of these risks.
Risk Management in the Arts
The practice of Risk Management is important for all organisations with most arts organisations understanding the importance of having a current Risk Management Plan. Many funding bodies across all tiers of government require a risk assessment for events or projects and it has become common practice to regularly develop risk management plans and strategies and to need to have these plans publicly available.
Risk management is a process in which businesses identify, assess and treat risks that could potentially affect their business operations.
From the small business development corporation in Western Australia.
“A risk can be defined as an event or circumstance that has a negative effect on your business, for example, the risk of having equipment or money stolen as a result of poor security procedures. Types of risk vary from business to business.
You must decide on how much risk you are prepared to take in your business. Some risks may be critical to your success; however, exposing your business to the wrong types of risk may be harmful.
The most common business risk categories are:
- strategic –decisions concerning your business’ objectives
- compliance –the need to comply with laws, regulations, standards and codes of practice
- financial –financial transactions, systems and structure of your business
- operational –your operational and administrative procedures
- environmental –external events that the business has little control over such unfavourable weather or economic conditions
- reputational –the character or goodwill of the business.
Preparing a risk management plan
Your risk management plan should detail strategies for dealing with risks specific to your business. It’s important to allocate time and resources to preparing your plan to reduce the likelihood of an incident affecting your business.
You can develop a risk management plan by following these steps:
- Identify the risk
- Assess the risk.
- Treat the risk.
- Monitor and review.
Access the full article here https://www.smallbusiness.wa.gov.au/legal-risk/risk-management
Much work has been undertaken by the arts sector as the importance of risk management have been a ‘must have’ for insurance, liability and legislative requirements for all business and across all tiers of government.
Some useful resources include:
The Australia Council for the Arts document “Essential Governance Practices for Arts Organisations”
“Establish a sound risk management framework and periodically review the effectiveness of that framework that ensures the organisation will deliver on its purpose.
The organisation should address risks that could have a material impact on its performance and business model. These may include, but are not limited to, strategic risks, operational or artistic direction risks, funding risks, reputational or brand risks, compliance risks, environmental risks, human capital risks, financial reporting risks and arts sector-related risks, for example.
Business risk is about uncertainty. Paradoxically artistic risk is not generally a business risk because the outcome can often be predicted.”
Creative New Zealand prepared a “Risk Management Toolkit – A Resource for Arts Organisations” that is a useful resource for arts organisations in assessing and planning for risk management for their operations. The full document is available here…