Strategic review of risk management

Report: 8
Date: 6 December 2001
By: Treasurer

Summary

Willis were appointed to carry out a strategic review of risk management in the MPA/MPS. It is proposed that a member group be set up to review their report in detail together with the MPS response. In the meantime it is proposed that steps be taken to secure the appointment of a dedicated risk manager.

A. Recommendations

1. The Committee note the conclusions and recommendations of Willis' strategic review of risk management and agree to set up a member group with the Professional Standards and Performance Management Committee and the Human Resources Committee to review Willis' report in detail and the MPS response.
2. The Committee agree the appointment of a dedicated risk manager.

B. Supporting information

Introduction

1. Earlier this year the Committee agreed the appointment of consultants to carry out a strategic review of risk management and long term risk financing arrangements. Willis were appointed to carry out this work.

2. Willis have now delivered their final report and the executive summary is attached as appendix 1 together with Appendix C of their report which summarises their recommendations.

Benefits of risk management

3. Willis have developed a detailed risk register based on a number of workshops involving MPS staff. The register covers risks across the whole of organisation and its business and is not limited to insurable risks. The register provides the basis for a comprehensive programme of management activity to reduce the likelihood and impact of such risks.

4. Willis's review confirms that there are substantial benefits to be derived from a systematic approach to risk management. The benefits will be both financial, particularly in reduced costs of liability claims and reduced insurance costs, and in terms of improved performance across the service.

Role of the MPA

5. One of Willis's recommendations is that the MPA should establish a risk management sub committee to monitor risk management performance and advise on risk management priorities.

6. Whilst it is essential that the Authority has an initial focus to support the MPS in adopting systematic risk management it is not clear that this requires a permanent sub committee. It is therefore suggested that a member group is set up drawn from the Professional Standards and Performance Management and Human Resources Committees as well as this Committee with an initial brief to review Willis's findings and recommendations and the MPS's proposed response. The group would also consider how the MPA's continuing interest would best be discharged.

Immediate steps

7. There are inevitably resource implications of implementing risk management which should be more than justified by the resulting savings and improved performance. Budget provision will be created from offsetting reductions in compensation claims beyond those reflected in the draft budget for 2002/03. Costed proposals will be considered by the member group as part of the MPS response to Willis's report. However it is clear that the MPS will need to appoint an appropriately qualified and experienced risk manager to lead this work and the Committee is asked to agree that the process for making that appointment should commence now.

Risk financing

8. Willis also make recommendations relating to risk financing which will need to be considered in the context of the renewal of existing insurance arrangements. It is suggested that these are also considered initially by the member group.

C. Financial implications

1. Willis' proposals for resourcing risk management would cost £350,000 per year, which they have suggested could be offset by savings in the claims management function. The scope for achieving this has not been verified. They also identify one-off costs of £250,000 to £350,000 in respect of systems development and external advice. They have also suggested investment of between £50,000 and £75,000 for research to create a credible claims history which would be of benefit in procuring future insurances.

2. All these proposals and costs require further consideration by the proposed member group. The only financial commitment proposed in this report is the appointment of a risk manager from April 2002 for which provision of up to £100,000, including overheads, is required. This will be met by offsetting savings in the compensation budget.

D. Background papers

None.

E. Contact details

Report author: Peter Martin, MPA.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1

Appendix 1 is available from Secretariat, MPA, in hard copy only.

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