2022 - Risk-Management-Guideline For The B.C. Public Sector

CHIEF RISK OFFICE
RISK MANAGEMENT BRANCH

RISK MANAGEMENT & GOVERNMENT
BRANCH & GOVERNMENTSECURITY
SECURITYOFFICE
OFFICE
Risk Management Guideline

for the B.C. Public Sector
August 2022
(Supersedes April 2019 version)
RISK MANAGEMENT GUIDELINE
FORWARD
Risk is defined as “the effect of uncertainty on objectives.” If we could see into the future, we
could prepare accordingly and there would be no need for risk management. Unfortunately, there
are no crystal balls, and both internal and external forces create uncertainty. Some of these forces
are within our control, but many are not.
Every day, we manage risk in an informal way. Consider a simple evening walk. You weigh the
risks and take actions to ensure your safety, such as looking both ways before crossing the street
or bringing an umbrella in case of rain. These daily personal decisions may not require formal risk
management; however, for those working in the public service, a formal risk program may be
required, for instance, to improve pedestrian safety within a community. A program could assess
risks and implement priority treatments such as installing additional cross walks or adding signage
or signals at busy intersections where required.
Enterprise Risk Management (ERM) provides an effective way for organizations to identify and
manage risks that may require cross-departmental collaboration and senior level decision-
making. As public servants, we strive to uphold the mission statement and vision of our
organizations on behalf of the citizens of British Columbia. The ability to recognize and proactively
manage the uncertainty that unfolds as we implement our strategies is crucial to our ultimate
success.
British Columbians rely on the B.C. government and its public sector organizations to provide
essential services and programs that are relevant, effective and resource conscious. Government
takes ownership of some of the biggest risks in society and provides critical services where
mistakes can be costly. As a result, a more formal approach to risk management is required.
Some explicit examples of formalized and enterprise-level risk management include legislation,
regulations, policies and practices. These “rules” guide people and processes. They work as risk
treatments, reducing the likelihood of loss and providing a framework for compliance audit.
Even with these strategies in place, you still need to consider some uncertainties could have an
impact (positive or negative) on your organization’s goals and objectives. How can decision-
makers utilize risk information to make informed decisions? This guideline provides
internationally adopted practices and principles to help B.C. public sector organizations establish
effective risk management programs.
August 2022 Copyright © 2022, Province of British Columbia. All rights reserved. Page 2 of 25
TABLE OF CONTENTS
SECTION 1 – GENERAL ..................................................................................................................... 4
1.1 RISK STATEMENT ............................................................................................................. 4
1.2 OBJECTIVES ...................................................................................................................... 4
1.3 ABOUT THIS GUIDELINE................................................................................................... 4
1.4 DEFINITIONS .................................................................................................................... 5
1.5 ADDITIONAL INFORMATION............................................................................................ 5
SECTION 2 – RISK MANAGEMENT IN THE B.C. PUBLIC SECTOR ...................................................... 6
2.1 RISK MANAGEMENT PRINCIPLES ..................................................................................... 7
2.2 RISK MANAGEMENT FRAMEWORK ................................................................................. 7
2.3 ROLES AND RESPONSIBILITIES ....................................................................................... 10
SECTION 3 – THE RISK MANAGEMENT PROCESS: HOW TO DO A RISK ASSESSMENT ................... 12
3.1 OVERVIEW OF THE PROCESS ......................................................................................... 12
3.2 COMMUNICATE AND CONSULT .................................................................................... 13
3.3 ESTABLISH THE SCOPE, CONTEXT AND CRITERIA .......................................................... 13
3.3.1 Specialized Contexts and Criteria: Sub-disciplines within Risk Management ....... 15
3.4 IDENTIFY RISKS .............................................................................................................. 16
3.4.1 Risk Identification Methods................................................................................... 16
3.4.2 Risk Categories ...................................................................................................... 16
3.4.3 How to State Risks ................................................................................................. 17
3.4.4 Existing Treatments ............................................................................................... 18
3.5 ANALYZE RISK ................................................................................................................ 19
3.5.1 Risk Rating ............................................................................................................. 19
3.5.2 Risk Rating Terms .................................................................................................. 20
3.6 EVALUATE RISK: EXISTING CONTROLS, TOLERANCE AND ACTION ................................ 21
3.7 TREAT RISK ..................................................................................................................... 22
3.7.1 Diversity of Risk Treatment (Mitigation) ............................................................... 22
3.7.2 Ensuring Effective Risk Treatment (Mitigation)..................................................... 23
3.8 MONITOR AND REVIEW................................................................................................. 24
3.8.1 Monitor: Regular Management of Risk Information ............................................. 24
3.8.2 Review: Historical Risk Information....................................................................... 24
3.9 RECORD AND REPORT ................................................................................................... 25
SECTION 1 – GENERAL
1.1 RISK STATEMENT

The B.C. public sector accepts risk as an integral part of doing business; manages risk by
monitoring, treating, and transferring it; and consciously retains residual risk at an appropriate
level.
1.2 OBJECTIVES
• Recognizing risk management as critical to the achievement of government’s goals and
governance responsibilities.
• Encouraging a culture that embraces innovation and opportunity, informed risk-taking
and acceptance of risk as inherent in all activities of government.
• Providing common and consistent risk management processes and practices that:
• offer assurance that risks are identified and appropriately managed, and
• support ministries in operational and strategic decision making.
1.3 ABOUT THIS GUIDELINE

This Risk Management Guideline is an update to the version that was released in 2019 and
assists in the application of consistent risk management practices across the B.C. public sector.
This guideline works in conjunction with:
1. ISO 31000:2018, the international standard for risk management adopted by the B.C.
government. This suite of resources includes:
• CSA ISO 31000:18 Risk management – Guidelines (CSA ISO 31000) provides
guidance for the provincial risk management framework and process.
• CSA ISO/TR 31004:14 (R2019) Risk management – Guidance for the
implementation of ISO 31000 provides detailed guidance for the
implementation of the provincial risk management framework.
• CSA IEC 31010:20 Risk management – Risk assessment techniques provides
guidance on selection and application of systematic techniques for risk
assessment.
• ISO Guide 73:2009 Risk management – Vocabulary provides risk
management terminology to be consistently applied throughout risk
management activities.
2. Core Policy and Procedures Manual (CPPM), Chapter 14: Risk Management provides
risk management direction to ministries. It assigns specific risk management roles and
responsibilities, establishes the Enterprise Risk Management (ERM) framework for the
B.C. public sector, and details specific risk management and reporting processes and
tasks. Provincial crown corporations and B.C. public sector agencies must follow the
spirit and intent of CPPM and can use this policy as a guide to implement their own risk
management policies.
3. Supporting tools and documents, such as the ISO Guidelines above, Standard Risk
Register, Risk Maturity Model, and guides to loss reporting, insurance, indemnities, and
financial guarantees are available at the Risk Management Branch intranet site
(government access only). Provincial crown corporations and other B.C. public sector
agencies may contact the Risk Management Branch (RMB@gov.bc.ca) for access to
these resources.
1.4 DEFINITIONS
The B.C. government utilizes definitions for risk management as included in this guideline and, if
not defined in this guideline, then as defined in the ISO Guide 73:2009 Risk Management –
Vocabulary.
Risk: the effect of uncertainty on objectives.
Risk Management: the structured and disciplined efforts to understand and treat risk,
reduce uncertainty and better meet or exceed goals and objectives.
Enterprise Risk Management (ERM): the coordinated, ongoing application of risk

management across all parts of an organization, at all levels, from strategic planning to
service delivery.
ERM Program: the framework that the organization has in place to govern risk
management activities. This includes how risk is assessed, the roles and responsibilities
of senior leaders and all employees in managing risk, and the effective reporting and
communication of risk information throughout the organization.
1.5 ADDITIONAL INFORMATION

To support the B.C. public sector, and to provide risk management advice from a government-
wide perspective, the Risk Management Branch offers advisory services in areas as diverse as
security and loss prevention, insurance, procurement risk, project management risk, health and
education risk financing programs, and claims and litigation.
For more information or to engage the services of a Risk Management Consultant, contact the
Risk Management Branch at 250-356-1794, or email RMB@gov.bc.ca.
SECTION 2 – RISK MANAGEMENT IN THE B.C. PUBLIC SECTOR

The BC Government has adopted an international standard, CSA ISO 31000, to provide a
structure for managing risk and implementing effective ERM Programs across the B.C. public
sector. In this context, enterprise is defined as the whole of government, including B.C.
government ministries and all public sector organizations that work together to provide services
to British Columbians. Strong ERM Programs enable senior leaders to:
• identify and communicate risks shared across the B.C. public sector;
• apply combined risk mitigation strategies;
• determine overarching priorities;
• facilitate discussion of the types and levels of risk government is prepared to accept
(tolerance); and
• make long-term plans for the future.
All ERM Programs are comprised of three components: principles for managing risk, the risk
process that guides the identification and assessment of risk (see Figure 1), and a framework
which governs the reporting and communication of risk information.
The CSA ISO 31000 was updated in 2018 and considers shifts in global risk management
practices and to address new challenges faced by organizations. This version places more
emphasis on the involvement of senior leadership and the integration of risk management with
organizational business processes. This updated standard is integrated within the B.C
government as these enhancements represent two of the five pillars that comprise our risk
maturity assessment framework.
B.C. government ministries and public sector organizations are encouraged to build an ERM
Program based on the three key components, but tailored to their decision-making structure
and encompassing the elements found within the standard.
Figure 1: CAN/CSA-ISO 31000 Principles, Framework and Process
2.1 RISK MANAGEMENT PRINCIPLES

An ERM Program should improve performance, encourage innovation and support the
achievement of objectives. CSA ISO 31000 provides a set of principles to consider when
establishing your organization’s framework and related processes (see Figure 2). These principles
are centred around the ERM Program creating and protecting value for the organization.
Figure 2: CSA ISO 31000 Principles
2.2 RISK MANAGEMENT FRAMEWORK

An ERM Program should include a risk management framework that governs risk management
practices and is tailored to the organization. A framework ensures that information about risk
collected through the risk management process is adequately utilized and is considered as a
basis for decision-making at all relevant organizational levels.
This requires the establishment of the right structure to assign responsibility and facilitate the
gathering and communication of risk information.
REFLECTION: How do you know your ERM Program is effectively

contributing to decisions?
CSA ISO 31000 provides a framework that should be tailored to the organization’s business
processes. Risk management is not a separate exercise that is conducted periodically, it should
be regularly integrated into business processes accordingly to inform decision-making (see Figure
3).
Figure 3: CSA ISO 31000 Framework
Leadership and Commitment: Top management and oversight bodies should ensure that risk
management is integrated into all organizational activities and should demonstrate leadership
and commitment.
Integration: Integrating risk management relies on an understanding of organizational

structures and context. Structures differ depending on the organization’s purpose, goals and
complexity. Risk is managed in every part of the organization’s structure. Everyone in an
organization has responsibility for managing risk.
Design: When designing the framework for managing risk, the organization’s ERM Program
should:
• Understand the organization and its context
• Articulate risk management commitment
• Assign the organization’s risk management roles, authorities, responsibilities and
accountabilities
• Ensure allocation of appropriate resources
• Establish an approach to communication and consultation
Implementation: Properly designed and implemented, the risk management framework will
ensure that the risk management process is a part of all activities throughout the organization,
including decision-making, and that changes in external and internal contexts will be adequately
captured. A risk management framework is implemented by:
• Developing an appropriate plan including time and resources.
• Identifying where, when and how different types of decisions are made and by whom.
• Modifying the applicable decision-making process where necessary.
• Ensuring that that arrangements for managing risk are clearly understood and practised.
Evaluation: To evaluate the effectiveness of the risk management framework, performance
must be periodically measured to determine if it remains suitable to support achieving the
objectives of the organization.
Improvement: The risk management framework should be continually monitored and adapted
to address external and internal changes. As relevant gaps or improvement opportunities are
identified, plans and tasks can be assigned to those accountable for implantation and enhanced
risk management practices.
REFLECTION: How do you know your organization’s ERM Program is

effective and creates value?
The B.C. government’s Risk Maturity Model helps B.C. government ministries and public sector
organizations assess their risk management maturity (see Figure 4). By assessing within twenty
attributes across five pillars, organizations can determine where they land on the risk maturity
continuum and determine opportunities for growth and improvement to their ERM program.
Figure 4: B.C. government’s Risk Management Maturity Model
2.3 ROLES AND RESPONSIBILITIES

The following roles and responsibilities enable the effective application of risk management
throughout the B.C. public sector.
Ministries are responsible for:
a. ensuring their ministry’s compliance with government’s risk management policy as
established in CPPM Chapter 14: Risk Management, including the appointment of an
Assistant Deputy Minister responsible for ERM implementation;
b. establishing a ministry-specific ERM Program, which includes their associated public
sector organizations that align with this guideline and CSA ISO 31000; i
c. integrating the risk management process into existing ministry planning, reporting,
operations, and service delivery functions; and
d. implementing risk management strategies to address identified risks within their
ministry, which includes working with their associated public sector organizations to
address key risks identified and provide the minister responsible’ s direction on key risks
where appropriate.
Risk Management Branch is responsible for:

a. performing the functions of a government-wide Chief Risk Office as outlined in CPPM
Chapter 14;
b. providing central risk management programs, advice and consultation services to all B.C.
public sector organizations; and
c. operating the Government Security Office, including the role of Chief Security Officer,
with overall responsibility for security within government.
Internal Audit and Advisory Services is responsible for:

a. using ERM to inform the annual Internal Audit & Advisory Services risk-based
government-wide annual audit work plan;
b. reviewing risk management practices across government; and
c. assessing the effectiveness of established risk mitigation strategies/controls within
ministries and across government.
Every manager is responsible for:

a. integrating sound risk management planning and process into the business processes
they are responsible for; and
b. reporting risks with causes, impacts, or mitigations beyond their scope of responsibility
to executive.
Every employee is responsible for:

a. applying sound risk management within the scope of their duties and responsibilities;
and
b. reporting risks with causes, impacts, or mitigations beyond their scope of responsibility
or available resources to their manager.
REFLECTION: Do your employees know what their responsibilities are

in relation to generating and communicating risk information?
SECTION 3 – THE RISK MANAGEMENT PROCESS: HOW TO DO A RISK

ASSESSMENT
3.1 OVERVIEW OF THE PROCESS
CSA ISO 31000 outlines the risk management process, (see Figure 5) and provides a step-by-step
guide to identify, assess and treat risk. This process is scalable and can be applied at strategic,
operational, program or project levels.
Figure 5: CSA ISO 31000 Risk Management Process
The risk management process should be an integral part of business management. The risk
information that is gathered through this process should be shared throughout the organization
as prescribed by the organization’s ERM Program to support decision-making.
REFLECTION: How does your ERM Program gather and communicate

risk information using the risk management process?
3.2 COMMUNICATE AND CONSULT

“Communication and consultation with appropriate external and internal stakeholders should
take place within and throughout all steps of the risk management process” (CSA ISO 31000,
Section 6.2)
The consultative team approach means that the assessment of risk is proactive and inclusive and
involves those who understand the risks and are best able to manage them. Communication and
consultation must be used to ensure that risk reporting goes up to higher levels, and that
executive decisions regarding tolerance of risk and priorities for action get communicated back
down to the business unit level.
Depending upon the context, the organization conducting the risk assessment must determine
the correct balance of and limits to direct participation. We recognize that it is not always
practical or productive to bring all stakeholders to the table. Still, you are seeking a full range of
perspective - advocacy, systems, budget, policy, senior leaders, front line delivery and so forth.
Wider participation brings the benefits of greater expertise, experience and buy-in balanced
against the requirements for confidentiality, timely action, and strategic scope. RMB can provide
advice when deciding which stakeholders should be included in a risk assessment.
3.3 ESTABLISH THE SCOPE, CONTEXT AND CRITERIA

“The purpose of establishing the scope, the context and criteria is to customize the risk
management process, enabling an effective risk assessment and appropriate risk treatment.
Scope, context and criteria involve defining the scope of the process and understanding the
external and internal context” (CSA ISO 31000, Section 6.3)
“Establishing the scope, context and criteria” for a risk assessment performs a number of
functions. It confirms the subject of the risk assessment, the subject’s goals and objectives, and
the goals and objectives of the risk assessment itself; identifies stakeholders; and acknowledges
constraints and limitations imposed on the subject and on the risk management process.
Factors influencing context may be internal, such as executive direction, government policies,
budget, regulations and culture; or external, such as other government jurisdictions, national or
international economic forces, climate and natural events, or citizens and special interests.
When applying the risk management process to day-to-day decision making, it may be sufficient
to establish the scope, context and criteria informally. Formal risk assessments, however,
benefit from a thorough examination and detailed recording of these elements. A written
document will ensure all stakeholders involved in the process have a clear understanding of the
scope, context and criteria. It also proves invaluable for recording the environment in which the
risk management decisions are made and can demonstrate due diligence if those decisions are
revisited later.
For this reason, the B.C. government has established the Context Paper Template to record
these elements:
1. Subject of the risk analysis: What is being reviewed e.g., is it a strategic plan, service plan,
project, program, policy, process or procedure? State the scope with respect to
organization, hierarchical level, and time frame. Specify whether the context is strategic or
operational.
Hint: If there is no plan or policy yet created, and there is a need for a risk profile on a
particular issue, then the subject of the risk analysis may be the status quo i.e., the
organization’s current approach to the issue. If general goals or values are provided, the
team can generate a risk profile.
2. Goals and objectives: You should clearly establish what the risk assessment seeks to do
because there may be multiple sets of related goals and objectives:
• Those of the ministry, division or branch sponsoring the risk assessment. Clearly
establishing those higher goals and objectives will help ensure the subject of the risk
assessment is aligned with strategic direction.
• Those of the program, policy or plan in question. Risks are best identified in relation to
either broad strategic goals (at the highest level of planning) or in relation to objectives
and specific activities. The list of goals, objectives and strategies (activities) can serve to
structure the discussion of risk.
• Those of the risk assessment process itself. For example, a risk assessment may be used
to inform whether a proposal or project should proceed, or to ensure the success of a
new initiative.
Hint: If there is no program of activities yet designed, state the highest overall goals, and
sketch the main components of a draft plan. This will provide a basis to generate a risk
profile and mitigations to inform a final plan
3. Value criteria: These are the guiding principles of the organization, such as a professional
ethical code, business practices, political priorities, or operating principles found, for
example, in existing vision and mission statements. They might take the form of special rules
(e.g., how to conduct business in a specific context). Participants refer to value criteria to
help to identify and assess risks.
Hint: It is important to keep value criteria in plain view during the session. They serve as a
common point of reference to aid in formulating and assessing risks. If controversy arises, or
conversation deviates, anchor points or parametres can help refocus the conversation to
what needs to be assessed.
4. Stakeholder analysis: This involves the identification of internal and external stakeholders
and their respective roles, degree of influence, interests and motives and position with
respect to value criteria. They can be both bearers of risk, and/or sources of it.
Hint: Refer to existing consultation papers. A diverse range of session participants, where
appropriate and within the limits of facilitation, lends rigour to the process and leads to a
better quality result. Tools to assist in the conduct of a stakeholder analysis are available
from Risk Management Branch.
5. Assumptions and constraints: These include fixed deadlines, executive directives, resources
or other limiting conditions.
Hint: Legislation, regulation and policy are part of the context in which the risk assessment
will take place. Not only do they often address the risks identified, but they also guide the
implementation of proposed mitigation strategies.
6. Deliverable for the session: This is the intended product of the session. A typical deliverable
statement might be “a comprehensive list of risks, with rankings and summary treatments
arrived at by consensus, to inform an improved business plan/policy/program”.
3.3.1 Specialized Contexts and Criteria: Sub-disciplines within Risk Management

Do not let the identification of risk stray out of scope of the defined context. Recognize, too,
that certain perils or exposures call for a specialized risk analysis as a separate exercise. For
example, earthquake, hurricane or flood hazards create risk exposures in almost any context.
Those risks belong to a specialized analysis for emergency and business continuity planning.
Similarly, security risks with respect to physical dangers, facilities, and procedures, require a
security review, which is an expertise unto itself. These specialized areas may bring their own
criteria and resources to bear upon the process.
Risk Management Branch can assist with many of these specialized sub-disciplines and can refer
client ministries to other experts across government, such as Emergency Management B.C.,
Government Chief Information Officer, and Treasury Board Staff.
Examples of Risk Management Sub-Disciplines
Figure 6: Provincial Risk Treatment Specialized Disciplines
3.4 IDENTIFY RISKS

“The purpose of risk identification is to find, recognize and describe risks that might help or
prevent an organization achieve its objectives. Relevant, appropriate and up-to-date information
is important in identifying risks.” (CSA ISO 31000, Section 6.4.2)
3.4.1 Risk Identification Methods

Typically risk assessments rely on expertise, knowledge, and experience, but there are other
tools and methodologies that can aide teams in the risk assessment process. These include:
• interview/focus group discussions;
• audits or physical inspections;
• questionnaires or surveys;
• networking with peers, industry groups and professional associations;
• incident, accident and injury investigation;
• loss history analysis (such as government’s General Incident or Loss Reports (GILRs));
• scenario analysis (what ifs);
• process analysis;
• strengths, weaknesses, opportunities, threats (SWOT) analysis; and
• flow charting, system design review, systems analysis.
CSA IEC 31010:20 Risk management – Risk assessment techniques also offers a variety of risk
assessment techniques for various stages of the risk assessment process, including root cause
analysis, scenario analysis and Monte Carlo simulation.
Many ministries and public agencies have designated risk management positions or employees
with risk management experience. Consult with internal risk management resources and inform
ministry risk management experts of your risk management activities. In their absence, Risk
Management Branch’s consultants are trained facilitators and can assist your organization with
the risk assessment process.
3.4.2 Risk Categories
When identifying risk, it is important to take an enterprise-wide view of all potential threats and
opportunities that may have an impact on objectives. RMB has researched industry best practice
and collaborated with government central agencies to develop risk categories to consider when
identifying risk. The major categories are Hazard, Operational, Financial, and Strategic. For more
details about these categories and resources available to assist with risk assessment, in
particular categories or sub-categories, please refer to the B.C. Enterprise Risk Categories Tool.
3.4.3 How to State Risks

Once you’ve identified all possible risks, the
recommended method for stating risk involves
considering its three elements: event, causes, and
impacts. Being articulate about defining the risk event will Causes Impacts
help develop tangible, treatable strategies.
You can test your risk event statements. As with the fire Risk
triangle, fuel, oxygen, and a source of ignition are
required. When one element is removed, the fire is
prevented or extinguished. By identifying risk by its three Event
elements (Figure 7) provides treatable options: by acting
on one of the elements, the risk can be affected. Figure 7: Risk Elements
Since we define risk as “the effect of uncertainty on

objectives”, it is helpful to link your organization’s objectives to the risk identification. Define the
event as something that could prevent achievement of an objective, milestone or target, or
create an opportunity to exceed them. From there, the causes and impacts become easier to
identify.
Use of a bowtie diagram, as illustrated below (Figure 8), can be helpful in identifying multiple
causes and impacts of a single event:
Figure 8: Risk Management Bowtie Diagram
A generic example of a negative risk tied to a goal of a fictitious entity – a zoo. In this case, a
strategic organizational objective is “safe and secure stewardship of their animal exhibits”. A risk
event that could influence that is “escape of the bear”. Causes and impacts flow from this event:
1. Identify a risk event related to an in-scope objective. Do not state general unfavourable
conditions, in and of themselves, as risk events.
2. List the potential causes of such an event. There are often multiple causes for a given
risk event. Ask yourself “why” the event might happen. Use of root cause analysis
methods (such as the Five Whys tool) can be effective.
3. Identify the impacts of the event, should it happen. Ask yourself, “So what if the event
were to occur?” Keep asking “so what” to the chain of impacts until all realistically
potential impacts are identified.
Example
Event: Failure to secure project objective #1: Treasury Board approval for required
project funding.
Causes:
a. Possible 10% budget cut across government.
b. TB submission fails to link project goals with Ministry objectives.
c. Failure to meet submission deadlines.
Impacts:
a. Possible termination of project.
b. Resubmission to Treasury Board and costly delays.
c. Funding of project from within existing operational budget, leading to service
reductions elsewhere.
The Standard Risk Register is the tool that the B.C. government uses to document the risk
assessment and manage the risk management process. We do not recommend using risk
registers pre-populated with generic risks as this may stifle the brainstorming process. Refer to
section 3.4.1 Risk Identification Methods and Categories above for examples of sources of risk.
3.4.4 Existing Treatments
Once the risk is clearly identified and details the risk event, causes and impacts, it is important
to identify existing treatments (i.e., mitigations). Ask what measures are currently in place (if
any) to treat this risk. In the risk register, list only those treatments that already exist.
Identification of additional proposed treatments (if required) happens later, after the group has
evaluated the adequacy of existing treatments and the significance of the risk.
3.5 ANALYZE RISK

“The purpose of the risk analysis is to comprehend the nature of risk and its characteristics
including, where appropriate, the level of risk. Risk analysis involves a detailed consideration of
uncertainties, risk sources, consequences, likelihood, events, scenarios, controls and their
effectiveness. An event can have multiple causes and consequences and can affect multiple
objectives.” (CSA ISO 31000, Section 6.4.3)
3.5.1 Risk Rating

Risk analysis is the process of calculating the likelihood of an event and the consequence if it
were to occur. The product of these two variables is the Risk Rating (see Figure 9).
LIKELIHOOD
5 LOW MED HIGH EXT EXT LIKELIHOOD X CONSEQUENCE
4 LOW MED HIGH HIGH EXT SCORE 0–5 = LOW
3 LOW MED MED HIGH HIGH SCORE 6 – 10 = MEDIUM
2 LOW LOW MED MED MED SCORE 12 – 16 = HIGH
1 LOW LOW LOW LOW LOW SCORE 20 – 25 = EXTREME
1 2 3 4 5
CONSEQUENCE
Figure 9: Risk Rating Matrix
Likelihood: is the chance that the risk event identified will actually occur. When available,
statistical data can support estimates of likelihood and severity. In practice, however, often we
do not have historical data. Instead, we often rely on the experience of those around the table;
therefore, likelihood rarely implies mathematical certainty; rather it is a subjective estimate.
Likelihood = Probability of the risk event actually occurring

Score Criteria Probability (%)
5 Almost Certain 80%-99% or Once a year or more frequently
4 Likely 61%-79% or Once every three years

3 Possible 40%-60% or Once every five years
2 Unlikely 11%-39% or Once every 15 years
1 Almost certain not to happen 0%-10% or Once every 25 years
Consequence: is the outcome of an event affecting objectives. A B.C. government ministry or

public sector organization can adjust the consequence criteria appropriate to their lines of
business (perhaps quantifiable in terms of budget dollars), and risk appetite. Many organizations
develop a “scorecard” with several categories of consequence.
Consequence = Degree of severity, with respect to goals/values, should the risk event occur
Score Impact Descriptor

• Major problem from which there is no recovery.
5 Catastrophic • Significant damage to ministry credibility or integrity.
• Complete loss of ability to deliver a critical program.
• Event that requires a major realignment of how service is
delivered.
4 Major
• Significant event which has a long recovery period.
• Failure to deliver a major political commitment.
• Recovery from the event requires cooperation across
3 Moderate departments.
• May generate media attention.
• Can be dealt with at a department level but requires Executive
notification.
2 Minor
• Delay in funding or change in funding criteria.
• Stakeholder or client would take note.
• Can be dealt with internally at the branch level.
• No escalation of the issue required.
1 Insignificant
• No media attention.
• No or manageable stakeholder or client interest.
3.5.2 Risk Rating Terms
The terms associated with the ranking of risks vary across the risk management discipline;
therefore, some clarification is required. Inherent Risk, Initial Risk, Residual Risk, Current Risk,
and Risk Tolerance are common terms used within the B.C. public sector. It is not necessary to
use all the different risk ratings for any particular risk assessment, but as a minimum, the rating
of initial risk is required, and residual risk is recommended.
Inherent risk: involves rating the exposure in the absence of existing controls. When seeking to
understand inherent risk, we are considering a hypothetical condition free of all controls, like
locks, rules, procedures, ethics and so forth. This can be difficult to imagine. However, there is
value in assessing risk this way as it can identify whether an exposure is over- or under-
controlled. This is of particular interest to ministry executive and auditors. Strategic risk
assessments, of ministry business plans, for example, often benefit from an assessment of
inherent risk.
Initial risk: involves rating the exposure within its current control environment (i.e., now). Initial
risk is a baseline against which you can measure progress. Reviews of loss histories, reviews of
similar sectors’ loss histories, and consultation with stakeholders can support the assessment
process.
Residual risk: involves rating the exposure after the development of additional
mitigation/treatment strategies. It is important to establish a residual risk rating because it is a
prediction of the efficacy of proposed treatments. It also serves as a start point for an informed
discussion of acceptable risk with senior decision-makers.
Current risk: is a measure of progress. Later, regular updates on the progress of risk treatment
strategies can be valuable in helping to demonstrate progress or to secure additional resources
for stalled mitigation efforts. The tracking of current risk over time allows efficient shifting of
resources to problem areas or to areas of opportunity. In addition, tracking the progress of
current risk can help demonstrate the effectiveness of the organization’s risk management
program.
Risk tolerance: is the maximum level of risk the organization is willing to accept for a particular
exposure. Executive should provide this once briefed on the nature of the risk, existing controls
and the implications of planned mitigations. Ideally, residual risk and risk tolerance are equal.
This would confirm that senior executive has committed to the planned additional treatments
and has consciously retained the remaining residual risk.
3.6 EVALUATE RISK: EXISTING CONTROLS, TOLERANCE AND ACTION

“The purpose of risk evaluation is to support decisions. Risk evaluation involves comparing the
results of the risk analysis with the established risk criteria to determine where additional action
is required.” (CSA ISO 31000, Section 6.4.4)
Risk evaluation consists of considering the ranked risk in relation to existing controls and the
organization’s tolerance for the particular risk in question. The purpose is to arrive at a decision
as to how to respond to risks – guided by specific value criteria and cost/benefit. There are three
considerations when evaluating existing controls. Enter the following into the risk register
columns (see Standard Risk Register).
1. Characterize, in qualitative terms, the existing controls:
Non-existent, Inadequate, Adequate, Robust, Excessive (this latter indicates over-
controlling and so possibly overspending).
How would you describe the process, policy, device, practice or other action already in
place that mitigates the risk in question?
2. Characterize the risk in relation to the organization’s degree of tolerance:
Unacceptable/ Acceptable with treatment/ Acceptable
It is possible to have ‘zero” tolerance for certain risks (assuming one can avoid them). A
risk may be “Acceptable” either because it is inevitable and too prohibitive to treat, or
because it is immaterial and not worthwhile to treat. Over time, ministries may develop
risk criteria or measures of risk tolerance or risk thresholds. Expressing tolerance for an
unexpected financial loss over a certain percentage of operating budget as
“unacceptable” might be one way executive can quantify their tolerance of certain risks.
3. Decide on consequent action, based on steps 1 and 2:
Avoid/ Treat/ Monitor only (tolerate)
You may avoid a risk altogether, if unacceptable, by not doing the action that would
incur it in the first place. We tolerate and monitor risk when treatment is impracticable
or prohibitive. We monitor risks that are inconsequential, but whose status might
change.
3.7 TREAT RISK

“The purpose of risk treatment is to select and implement options for addressing risk.” (CSA ISO
31000, Section 6.5)
If the current level of risk is unacceptable or acceptable with treatment, you should recommend
a treatment strategy.
Risk Avoidance: It may be possible to eliminate a risk event entirely by ceasing the activity
associated with the event. Given that government delivers society’s riskiest services to its most
vulnerable members, this is not often possible. It is worth asking though “if this activity is
something that government needs to be doing?” Risk avoidance is the term given to the
elimination of risk by ceasing the associated activity, but it often introduces new risks, especially
reputation loss.
Prevention and Treatment Strategies: Other than avoidance, risk treatments work to prevent
the event by addressing the causes or decrease its impacts by treating the negative effects and
preparing for post-event recovery. Ask the group “what might be done to prevent the event
from happening”, then ask, “If it were to happen, how can we limit the damage done and get
back to business?”
3.7.1 Diversity of Risk Treatment (Mitigation)
As discussed in section 1, existing legislation, regulation, policies and procedures effectively
mitigate many government risks. These legal and administrative controls effectively reduce to
tolerable levels most risks associated with routine activities. The first risk management priority
of a ministry should therefore be a review of procedural controls and remedial action to educate
and encourage compliance. Internal Audit is an excellent resource to assist in assessing
compliance with policy.
Should existing treatments be inadequate, the subject be new, or if the context in which it is
applied should change, a risk assessment and consideration of additional treatments may be
appropriate.
Treatments (risk mitigations) can consist of virtually any sort of administrative action, as well as
the application of specialized disciplines – where a separate analysis may be required, e.g.,
emergency planning, business continuity planning, security planning, risk financing, financial
controls, and human resources management. Grouping risks in categories can help in the design
of cost-effective treatments.
3.7.2 Ensuring Effective Risk Treatment (Mitigation)

In B.C. public sector work, three points are necessary to underscore:
1. Treatments are new measures undertaken to mitigate identified risk. At times,
participants fall into familiar thought patterns and merely repeat the list of existing
controls and say there is nothing more to be done. Alternatively, they may say that the
implementation of their planned program activities constitutes mitigation of risk. It is
just here where the facilitator or risk champion may add value:
• A facilitator can lead off by asking (either naïve or well-informed) questions
about possible treatments and stimulate discussion;
• A facilitator can draw attention to the ranking of the risk – if participants are
reminded that it is high or extreme, and threatens the viability of the
program, they will feel less inclined to rank it lower or leave the matter
unattended. It is always best to rank the risk at the appropriate level. Public
sector employees are often risk averse by nature. If a risk is ranked high by
consensus of subject matter experts, that is how it should be recorded (e.g.,
healthcare is a good example where risks can be inherently high even with
current treatments. Additional treatments are then factored (a form of gap
analysis) to best manage the risk;
• A facilitator can introduce categories of implementation risk (well-
documented, common reasons for program failure) to inform the analysis;
• The necessity to study the issue and develop treatments “off-line” or in a
separate session can be flagged;
• The possibility of inviting expertise from outside the immediate group can
be raised; and
• At a minimum, the action of documenting the risk and bringing it to the
attention of a higher authority or other entity constitutes an improvement
in the management of the risk.
2. Document treatments. During the latter part of a risk identification and analysis session,
make summary statements of treatments. They might have to be elaborated upon
elsewhere, but briefly summarizing them allows the facilitator to cover a maximum
amount of material. A measure of due diligence is achieved by recording both the risks
and how they will be managed.
3. Translated treatments into action. Suggested treatments (mitigation of either a risk
likelihood or degree of consequence) are subject to cost-benefit analysis. The facilitator
must challenge the participants to commit to acting upon mitigation strategies. If the
risk management initiative is an enhancement to existing processes, then the
treatments must become new items in the list of project tasks or business plan
strategies. Assigning an individual by name to the development of a treatment strategy,
identifying a specific deliverable, assigning a due date, and listing required resources all
bring value and practicality to the risk assessment, and help transform planned
mitigations into action. The Standard Risk Register is formatted in such a manner and is
an excellent option for initiating the process.
3.8 MONITOR AND REVIEW

“The purpose of monitoring and review is to assure and improve the quality and effectiveness of
process design, implementation and outcomes. Ongoing monitoring and periodic review of the
risk management process and its outcomes should be a planned part of the risk management
process, with responsibilities clearly defined.” (CSA ISO 31000, Section 6.6)
3.8.1 Monitor: Regular Management of Risk Information

Monitoring has to do with managing your risk information as a regular practice. Risks
themselves undergo change and can require revision in terms of their description and ranking.
New risks appear. Old material requires striking through (striking through but not deleting) and
archiving. Therefore, we recommend a periodic updating of risk information, using the risk
register as a management tool – perhaps as the first agenda item in regular meetings. When
used to track the implementation of mitigation strategies and the resultant impact on risk
ratings, the risk register becomes a valuable communication tool by informing executive on the
progress or lack thereof, and any additional resources required.
A note on risk management software: initial trials with software designed to assist with the risk
management process showed that simple spreadsheets are often more appropriate to support
the early proof of concept. Start by defining your processes and information needs. A mature
practice of integrated service planning, performance, and risk management may eventually
warrant the use of a specialized application, and Risk Management Branch can provide some
advice on products that may be available or attributes that should be included. Many risk
management software programs are based on a pre-determined platform for another area (e.g.,
claims, security, occupational health & safety) then adapted, meaning they may not be the best
approach for a public sector organization and may also be costly. Decide what approach is best
for your individual organization.
3.8.2 Review: Historical Risk Information
In a mature practice of risk management, a growing body of information can inform analysis of
the risks themselves, their most common sources, their frequency and impacts /costs of actual
occurrence, the efficacy of treatments, and the occurrence of unforeseen events. All of this
serves to better manage risks and inform planning. Audits, complaints investigations, legal
judgements, and retrospective cost/benefit analysis are some sources of historical risk
information.
Another tool in ministries that facilitates the collection and analysis of historical information is
the General Incident or Loss Report (GILR). The GILR is a core government reporting tool for a
loss, or incident with the potential to lead to a loss. It allows for tracking of property losses and
“near misses”, identification of trends, and development of treatments. As such, it is one of the
tools available to assist in assessing risk. Ministries use of the GILR is mandated by CPPM
Chapter 20: Loss Management and CPPM Procedure L: Loss Reporting.
3.9 RECORD AND REPORT

“The risk management process and its outcomes should be documented and reported through
appropriate mechanisms.” (CSA ISO 31000, Section 6.7)
Recording risk management activities enables the organization to effectively document and
measure risk assessment outcomes. This improves the governance of risk management and
provides evidence to validate risk management decisions or to back recommendations to senior
executive. Documentation may include:
• Your organization’s policies and framework for your ERM Program. These documents
set risk management goals and expectations, establishes the ministry risk management
framework, assigns responsibilities and resources, establishes executive’s risk tolerances
and appetite, and gives guidance for organization-specific processes, reporting
structures, etc. Risk Management Branch can help B.C. government ministries and
public sector organizations develop and implement ERM Programs.
• Your organization’s risk assessment documentation, including context analyses, risk
registers complete with treatment strategies, and supporting historical data.
• Ministry’s responsibilities to report risk to Risk Management Branch, including the
direction outlined in CPPM Chapter 14: Risk Management. Other B.C. public sector
organizations must follow the spirit and intent of CPPM policy and work with their
oversight bodies, including their board of directors and the ministry responsible, to
implement an ERM program and report risk appropriately.
The Risk Management Branch provides assistance in

interpreting and implementing these guidelines.
Please contact the Risk Management Branch

at 250-356-1794 or RMB@gov.bc.ca

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CHIEF RISK OFFICE

RISK MANAGEMENT BRANCH

Risk Management Guideline

1.1 RISK STATEMENT

1.3 ABOUT THIS GUIDELINE

Risk: the effect of uncertainty on objectives.

Enterprise Risk Management (ERM): the coordinated, ongoing application of risk

1.5 ADDITIONAL INFORMATION

SECTION 2 – RISK MANAGEMENT IN THE B.C. PUBLIC SECTOR

Figure 1: CAN/CSA-ISO 31000 Principles, Framework and Process

2.1 RISK MANAGEMENT PRINCIPLES

Figure 2: CSA ISO 31000 Principles

2.2 RISK MANAGEMENT FRAMEWORK

REFLECTION: How do you know your ERM Program is effectively

Figure 3: CSA ISO 31000 Framework

Integration: Integrating risk management relies on an understanding of organizational

REFLECTION: How do you know your organization’s ERM Program is

Figure 4: B.C. government’s Risk Management Maturity Model

2.3 ROLES AND RESPONSIBILITIES

Risk Management Branch is responsible for:

Internal Audit and Advisory Services is responsible for:

Every manager is responsible for:

Every employee is responsible for:

REFLECTION: Do your employees know what their responsibilities are

SECTION 3 – THE RISK MANAGEMENT PROCESS: HOW TO DO A RISK

3.1 OVERVIEW OF THE PROCESS

Figure 5: CSA ISO 31000 Risk Management Process

REFLECTION: How does your ERM Program gather and communicate

3.2 COMMUNICATE AND CONSULT

3.3 ESTABLISH THE SCOPE, CONTEXT AND CRITERIA

3.3.1 Specialized Contexts and Criteria: Sub-disciplines within Risk Management

Examples of Risk Management Sub-Disciplines

Figure 6: Provincial Risk Treatment Specialized Disciplines

3.4 IDENTIFY RISKS

3.4.1 Risk Identification Methods

3.4.2 Risk Categories

3.4.3 How to State Risks

Since we define risk as “the effect of uncertainty on

Figure 8: Risk Management Bowtie Diagram

3.5 ANALYZE RISK

3.5.1 Risk Rating

Figure 9: Risk Rating Matrix

Likelihood = Probability of the risk event actually occurring

5 Almost Certain 80%-99% or Once a year or more frequently

4 Likely 61%-79% or Once every three years

2 Unlikely 11%-39% or Once every 15 years

1 Almost certain not to happen 0%-10% or Once every 25 years

Consequence: is the outcome of an event affecting objectives. A B.C. government ministry or

Score Impact Descriptor

3.6 EVALUATE RISK: EXISTING CONTROLS, TOLERANCE AND ACTION

3.7 TREAT RISK

3.7.2 Ensuring Effective Risk Treatment (Mitigation)

3.8 MONITOR AND REVIEW

3.8.1 Monitor: Regular Management of Risk Information

3.9 RECORD AND REPORT

The Risk Management Branch provides assistance in

Please contact the Risk Management Branch

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