Jeynes, Dr Jacqueline
Opal Services/ Aston University/ Birmingham B4 7ET tel 44 1905 428733 / j.jeynes@tinyworld.co.uk
ABSTRACT
As the 4 P’s are a fundamental principle of Marketing theory, so this paper puts forward the 10 P’s of Risk Management as a consistent and comprehensive approach to managing risks in a business. It takes a holistic approach to managing the risks to the business, including health and safety, security, environmental and technological risks, and broader employment, financial or competitive risks. It is a practical approach that should be applicable to a wide range of types and structures of firms across Europe, whatever their size. It is based on the author’s book “Risk Management: 10 Principles” published in 2001.
Key words
Ten principles, risk management, holistic, cross-functional, strategic decision-making
INTRODUCTION
Why is such an approach relevant? There are considerable pressures on business today, both internal and external, that require firms to be able to demonstrate to others that they are managing risks satisfactorily. These risks include health; safety; fire; environmental; financial; technological; investment and expansion.
The 10 P’s approach considers the positives and negatives of each situation, assessing both the short and the long term risk. It also considers controls and performance monitoring, all of it feeding into the development of future strategy. It is based on experience of the author working with a wide variety of client firms during the last 15 years, leading to publication of both a practical guide to managing health and safety specifically aimed at small firms [1], and a more theoretical text book covering risks generally [2].
The crucial point is that all the risks should be considered strategically in the business at the most senior level, not just financial risks, so an approach that can be applied consistently throughout is a valuable tool for management. The 10 P’s approach can be used to consider:
- Health and Safety risks – to workers, users of products, others on site, contractors, people living near the plant/ use of materials and substances/ sickness and ill health in the workplace/ surveillance and rehabilitation
- Security risks – copyright/ theft and fire/ storage facilities/ procedures for processing data/ violence to staff and personal safety
- Environmental risks – packaging/ disposal of products/ premises/ emissions/ taxation and penalties
- Financial risks – investment in plant and machinery/ ROI and ROC/ insurance and litigation/ long and short term planning
- Competitive risks – pricing strategies/ profit potential/ location/ public perception of the
firm/ benchmarking and standards/ penalties
On the other hand, a wholly theoretical approach is of limited value when in reality businesses do not operate in such a nice neat way! All these elements impact directly on each other, and the next section identifies briefly some of the main points related to each of the 10 P's.
POLICY
This may have been placed first on your own list on the basis that theoretically this should be the starting point. However, in practice this is not necessarily where people begin, certainly not in smaller firms where practical considerations dictate many of the subsequent policy decisions. It is, of course, a critical element in developing strategies that will enable the policy aims to be met.
A more realistic scenario may be one where various other elements in the 10P’s list feed into policy discussions and decisions, thereby making it a more dynamic element. Various policies may be developed in relation to
- health and safety,
- accident investigation, reporting and rehabilitation
- environment and waste management,
- employment and equal opportunities,
- purchasing and financial control
- competition
Clearly such policies must be developed in such a way that they co-exist easily with others, and to have the greatest impact must build on feedback from the other elements identified. In addition, the question will always be “how do these policies affect the identified risks?”
PLANNING
This includes planning at the strategic management level and the practical operations level, with all the other elements feeding information back to this stage and priorities for action being decided. While all the other “P’s” feed into this stage, it is vital that they are considered in such a way that they are all equally important in the decision making process. For example, much of the work over recent years to develop tools to help businesses manage health and safety risks is due to this element being given a much lower priority than financial issues. Sometimes this may be justified, but recent shifts in the emphasis of regulations covering the workplace mean that all risks must be considered.
Questions at this stage include
- what is the purpose of the planning activity – and who is interested in the results?
- Who will be involved in the planning process, either internal or external to the firm?
- How do all the other “P’s” feed into and impact on this stage?
- How will priorities for action be decided?
PRODUCT OR SERVICE
There are several risk factors associated with the product or service itself that then feed into questions about purchasing, production, waste management etc. These include
- stages of the life cycle of the product and recent trends
- the firm’s competitive position now and potential in the future
- “green” environmental issues that affect development
- life style trends and demographic changes
- a range of internal and external pressures on the business
PROCESS
Risks associated with the process itself can vary enormously, of course, depending on the type of business being considered. However, the fundamental questions will be related to
- the techniques used, and inherent risks associated with them
- controls in place to reduce risks
- potential impact of technological developments, both positive and negative
- changes in legislation and their impact on choice of techniques
- government initiatives to support and encourage firms to consider using new technologies
- skill levels of available staff, both inhouse and more widely available in the geographic area
PREMISES
This is often a significant risk factor for smaller firms, as they frequently have limited access to suitable premises either at start-up stage or when expanding production. At the other end of the scale, larger concerns with a variety of sites have additional risk factors to consider and must fully optimize the facilities available at each. A wide range of risk factors include
- suitability of premises to type of process involved, particularly in traditional manufacturing industries
- size of premises and facilities available
- financial concerns related to ownership or tenancy status, repairs, expansion etc
- location and means by which the product or service reaches the customer
- health, safety, fire and environmental risks to workers and others
PEOPLE
It is important to consider workers at all levels in the firm, especially those with non-traditional forms of work contract and temporary workers. There are broader considerations for some firms, as risks to visitors to the site and the wider public in the vicinity may need to be identified. Other issues include
- how workers are organised, for example as groups or teams,
- cultural issues including the “culture” within individual workplaces
- whether there exists (or should exist) union recognition for workers
- skills and competences of current workers and how closely these fit future needs
- training and supervision of workers
- legislative requirements aimed to reduce risks to workers
PROTECTION
This is much broader than just protection of people from health and safety risks, and includes identifying risks associated with the protection of
- people
- premises
- materials
- intellectual rights
- data and security
- the environment
plus other concerns such as insurance and the law.
PROCEDURES
This element relates to others in the 10 P’s quite closely, particularly the Product, Process and People. The sort of questions you might consider should include
- How appropriate are they for current production processes?
- Will they be appropriate for future production?
- How will the introduction of new technologies impact on existing procedures?
- Are they actually implemented as they should be, and are they monitored effectively?
- How is their effectiveness measured and evaluated?
- Do they serve to reduce risks or pose additional ones?
PURCHASING
This is a significant element in the management of risks that is often isolated from consideration of the other elements. There are broad issues such as
- the use of recognised Standards in the business
- the firm’s policy on Quality
- government policy on standards, environment, protection of workers etc
plus more specific issues for the firm such as
- cost and payment conditions
- types of materials, availability, delivery
- production processes and techniques
- technology and renewing or replacing equipment and machinery
- “green” issues and public perceptions of the firm
PERFORMANCE
As a risk factor, this relates to the criteria and performance measures chosen by the firm. Who are the stakeholders who actually want to know about performance, and what are these different groups actually looking for? Clearly, these questions will then impact on the type of measures chosen for a specific element of business performance, and how effectively risks are actually being managed.
Performance can be viewed at individual worker/ department/ company level, and may just be related to the individual firm or be part of a “benchmarking” exercise. Again, questions of health and safety, accidents and injuries, insurance claims, quality and environmental standards will all be part of the evaluation of risk management.
EVALUATING THE HAZARDS
Each of these elements can be considered against the risk factors identified earlier, following a variety of Risk Assessment methods, with the ultimate aim of ensuring relevant and appropriate Management strategies are put in place. Case Studies are a vital way to see this approach in practice. The accompanying presentation illustrates briefly the scoring process against specific risks, looking at factors such as severity or likelihood of impact, recovery possible for the business and cost implications. While all the elements are likely to have a significant score, some areas will appear as much more important when presented on a spider diagram (see slides 19 and 20) so can help in the process of prioritizing future actions.
CONCLUSION
All these elements must continuously feed into the Planning and Policy decisions, and thus into practical strategic decisions to be effective. If any of the elements are omitted, additional risks can be inadvertently introduced into other areas of the business. If the holistic approach suggested here is taken, this likelihood is further reduced. It also allows for realistic priorities to be decided by the firm, which are then more easily explained and justified to different stakeholder groups. As with other management tools, it should form the basis of an ongoing approach to controlling the business that involves all parties and establishes a practical, workable system applicable to the individual firm involved.
REFERENCES
- 1. Jeynes, J Practical Health and Safety Management in Small Businesses (2000) Butterworth Heinemann. ISBN 07506 46802
- 2. Jeynes, J Risk Management; 10 P’s (2001) Butterworth Heinemann. ISBN 07506 50362