Highways Agency

1 INTRODUCTION

January 2001

DOCUMENT OBJECTIVE

1.1 This document sets out the Highways Agency's framework for Risk Management. It outlines both the Agency's approach to Risk Management and the associated roles and responsibilities of Agency colleagues.

1.2 The framework for Risk Management:

• is part of the business improvement programme and contributes towards the Agency's key objective number 8, 'to be a good employer, managing the Agency's business effectively and efficiently, seeking continuous improvement';
• relates directly to the Agency's Personal Development Plan competencies (number 8, problem solving and decision making);
• is a key element of the Highways Agency's ethos for project delivery (see Annex A); and
• builds on existing arrangements for Risk Management within the Agency.

1.3 Ownership and responsibility for maintaining this document rests with the Corporate Risk Management Advisor.

POLICY STATEMENT

We shouldn't be afraid to take risks, even if that means risking failure...
[Prime Minister Tony Blair].

1.4 In line with the Modernising Government white paper it is the policy of the Highways Agency to promote the creation of a more innovative and less risk-averse culture, involving a move from risk avoidance to "well thought through risk taking"

WHAT IS RISK?

1.5 For this document, the following definitions apply:

• Risk is anything that could hinder the achievement of business goals or the delivery of stakeholder expectations. Risk can arise from failure to exploit opportunities as well as from threats materialising.
• Risk Management is the culture, processes and structure aimed at managing potential opportunities and threats to an organisation.

THE BUSINESS CASE FOR MANAGING RISK

1.6 To be confident of meeting the challenges stemming from the 'Modernising Government' white paper and the requirements of 'Corporate Governance', it is necessary to ask whether the Agency has:

• Adequate and dynamic processes in place to identify existing and new risks faced;
• The right balance of arrangements in place to deal with these risks; and
• An adequate framework for risk analysis and evaluation to support our decision-making processes.

1.7 The Modernising Government White Paper encourages Departments and Agencies to adopt 'more well thought out risk taking', in an attempt to secure better value for money (VFM). In encouraging Agency colleagues to do this, however, they need to be provided with the tools to manage risks effectively. To facilitate this the Agency needs to have an effective and transparent approach to Risk Management in place (including the availability of practical guidance and training).

1.8 In order to generate improved VFM through sound Risk Management a balance has to be struck between risk taking and being risk averse, as illustrated below:

1.9 If Agency colleagues take decisions in ignorance of the associated risks, or regardless of their possible impact on the business, they are likely to reduce VFM rather than enhance it. This is exacerbated if the Agency is actively encouraging a more well thought out approach towards risk taking, without defining the framework or criteria within which colleagues are expected to do so.

1.10 At the other end of the scale, if colleagues are bound by detailed controls and procedures which seek to eliminate risk, VFM is also likely to be limited by the inefficiency of systems/processes and by colleagues being denied the opportunity to innovate. One basic example might be where the proper consideration of risk enables multiple invoice payments made to the same supplier to be consolidated into one, with considerable resource savings being made as a result.

1.11 To successfully implement Risk Management throughout the Agency, colleagues at all levels need to be encouraged to take a well thought through approach. However, in doing so they need to be provided with tools which enable them to identify, assess and fully take account of the risks in their decision making. To facilitate this, training and guidance will be made available on how to manage the risks effectively to deliver increased VFM.