RISK APPETITE IN PUBLIC SECTOR

ORGANIZATION

IRM SOUTH AFRICA REGIONAL GROUP MEETING

DE BEERS;CROWN MINES

11 FEBRUARY 2014

THE EXPERIENCE OF EMBEDDING A CULTURE OF MANAGING

RISK IN THE GAUTENG DEPARTMENT OF HUMAN SETTLEMENT

CONTENT

• Background

• Risk Appetite - implementation

• Way forward

• Conclusion

BACKGROUND – RISK AND CHANGE

BACKGROUND – SIZE OF THE ORGANISATION

• Entire Department Staff Complement - 1590

• Budget Allocation Human Settlement Development Grant + Equitable

Share = 4.4 Billion

• Enterprise Risk Management Unit (staff complements)- 12

• Five Regions Tshwane

Johannesburg

Ekurhuleni

Mogale & Meyerton

Westonaria

• Four Urban Renewal Project Evarton

Alexandra

Bekkersdal

Winterveld

BACKGROUND - TONE AT THE TOP

OFFICE OF THE MEC

MEC'S OFFICE

HEAD OF

DEPARTMENT

RISK MANAGEMENT

ENTERPRISE

RISK MANAGEMENT

INFORMATION

SECURITY

CORPORATE

GOVERNANCE

ANTI-FRAUD

AND CORRUPTION

HUMAN SETTLEMENT DEVELOPMENT

CORPORATE SUPPORT FINANCE

GOVERNANCE, POLICY, AND MONITORING AND

EVALUATION

LOCAL GOVERNMENT INSTITUTIONAL SUPPORT

BACKGOUND – RISK UNIVERSE

2009/10 2010/11 2011/12 2012/13 Housing Merged Merged Merged

20 risk exposures 21 Risk Exposures 14 Risk Exposures 8 risk exposures

Budgetary constraints to

eradicate housing backlog. Rapid urbanization,

population growth and in –

migration into Gauteng.

Inability to meet targets for

Human Settlement Projects Inability to meet expected

targets for Human

Settlement Projects

Delays in processing of

payments. Service delivery protest. Lack of Integrated

Information Technology System

Lack of Integrated

Information Technology

System 2 Lack of suitable and well

located land for housing

development.

Lack of suitable and well

located land for human

settlement development.

Housing backlog and rapid

increase in housing

demand

Limited well-located land

for Human Settlement

Development

Inability to manage growth

of informal settlements as a

result of emigration and

immigration into the

province.

Insufficient Budget to

provide and develop

integrated infrastructure.

Difficulty in acquiring

suitable and well-located land

Service delivery protests

Lack of integrated and

coordinated plan between

National, Province,

Municipalities,

Agencies/stakeholders i.e.

Eskom, Department of

Public Transport, Road and

Works etc.

Poor management of land. Lack of integrated cohesive

planning amongst the

spheres of Government to deal with Human Settlement

Fraud and corruption

RISK APPETITE - DERTEMINANTS

• Personalities/People

– Culture & Behavior

– Leadership

– Power

– Decision making

• Business Model and Strategy

– Mandate, Vision, Mission, Structure

• Compliance with Rules and Regulations

• External environment

– Community needs

– Stakeholders needs

– Services Rendered

– Ethos , Values and Batho Pele

– Political will

RISK APPETITE - LEGISLATIVE MANDATE

• Corporate Governance King Report III – Chapter 4 The role of HOD, CRO, Line managers and other officials

• PFMA Section 38 – Responsibility of the HOD

Section 45 – Responsibility of other officials

• Treasury Regulations Sec. 3.2 – Annual Risk Assessment(emerging risks)

Risk Management Strategy which include Fraud Prevention Plan

• Public Sector Risk Management Framework

• GPG Framework - COSO Guideline for Risk Management Processes – Adapt to our own

environment

• GPG Standards & Policy Ensures implementation of ERM and uniformity in the province –

Adopt as is

RISK APPETITE – OVERSIGHT

Oversight bodies Role

Executive Authority –

EXCO/Board

Governance of ERM in Province

Head of Dept.(HOD)/CEO Forum Quarterly reviews Top risks

Audit Committee(AC) Quarterly reviews Top risks

GPG Risk Management Forum CRO meet quarterly – Status on

ERM Implementation

General Audit Services(GAS)-

Internal Audit

Conduct Risk based audit & test

ERM Implementation annually

Auditor General(AG) – External

Audit

Annual reviews

SCOPA Review AG Report on Risk Matters

Public Service Commission Annual review ERM Implementation

National Treasury Test maturity levels (SSP)

National Human Settlement Annual review DORA - Grant

RISK APPETITE LEADERSHIP AND OWNERSHIP

• HOD Understood the need to embed risk management culture – PFMA Sec 38

Mandate for RM processes

He gave unqualified support and priority – “Setting the Tone at the Top”

• MANAGEMENT(DDGs, CD &Directors) Difficult group to convince

Own perception on risk appetite

We had to fight for their time and attention with other departmental

priorities

Rank was critical to them

• CRO Embed risk management to entire organization – Coordination and

Facilitation

Get buy – in from all stakeholders

Empower the leadership and the rest in risk management

RISK APPETITE- STRUCTURES

Risk Man. Committee Sits quarterly, Chaired by HOD Includes

DDGs & CDs

Risk Management Sub-

Committee Sits bi-monthly, chaired by CRO, Appointed

Risk Champions

Chief Risk Officer Facilitates & coordinates the above

RISK APPETITE - INGREDIENTS

Relationship

MANDATE

STRATEGY

OBJECTIVES

GRANT ALLOCATION

BUDGET/ VOTE

TARGETS

HUMAN SETTLEMENT

&

HOW WELL WE SPEND

RISK TORALENCE

Organisational Performance

Aligning expenditure

to set targets

Risk Tolerance

Risk Appetite

RISK APPETTITE – SYNERGY PROCESSES

3. ANNUAL PERFOMANCE PLAN

Risk identified for each

programme and sub-programme;

setting targets

1. STRATEGIC PLANNING

Risk and mitigation measure

identified for each Strategic Goals &

Objective

5 .MONTHLY,QUARTERLY

AND ANNUAL REPORT

Risk Reporting

Risk Management

Statement annual report

Top Management

Commitment

towards risk

Annual Report

Business Processes

Performance Agreement

Annual Performance

Plan

Budget Processes

Strategic Planning

5. BUSINESS PROCESSES

Risk incorporated into:

Business Decision

Business Meetings

Business Function

4. PERFOMANCE

AGREEMENT

Performance

Review on

management of

risks within area

of responsibility

2. BUDGET PROCESSES

Risk Appetite identified in

relation

to strategic Goals &

Objective

RISK APPETITE - MEASURING PERFORMANCE

Financial Non

financial

Expenditure Meeting the

targets

RISK APPETITE – IMPACT

• Difficult to quantify risk appetite as service

based organisation

Difficulty in funding risk appetite

• Reliance on how well we perform as an

organisation as per external audit outcome

Difficulty in aligning financial performance to

none financial performance

• Risk and change in our environment – affects

continuity

• Involvement of all stakeholders in housing

value chain is a challenge

WAY FORWARD - BUILDING ORGANASIONAL RESILIENCE

Organisation

Governance

Leadership

Ethics

Conduct

Risk

Management

Internal controls

Performance

&

Reporting

CONCLUSION

KEEPING THE MOMENTUM

IS KEY FOR SUCCESSFUL RISK APPETITE

CONCLUSION

THANK YOU