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Item 4GProactive & Balanced Risk Management Item No. 4G Authorize the City Manager to enter into a professional services agreement with Webb Watch for control assessment services. Managing Risk What is Meant by Risk? Why We Should Care – The Changing Landscape Who Should Be Involved? Southlake’s Plan - A Proactive & Balanced Risk Assessment Process A Definition of Risk The possibility of suffering harm or loss; danger. A factor, thing, element, or course involving uncertain danger; a hazard: "the usual risks of the desert: rattlesnakes, the heat, and lack of water" (Frank Clancy). a. The danger or probability of loss to an insurer. b. The amount that an insurance company stands to lose. a. The variability of returns from an investment. b. The chance of nonpayment of a debt. One considered with respect to the possibility of loss: a poor risk. Financial ENVIRONMENT RISK PROCESS RISK INFORMATION FOR DECISION- MAKING RISK Competitor Customer Wants Technological Innovation Sensitivity Shareholder Expectations Capital Availability Sovereign / Political Legal Regulatory Industry Financial Markets Catastrophic Loss Price Interest Rate Currency Equity Commodity Financial Instrument Liquidity Cash Flow Opportunity Cost Concentration Credit Default Concentration Settlement Collateral Empowerment Leadership Authority/Limit Outsourcing Performance Incentives Change Readiness Communications Information Technology Integrity Access Availability Infrastructure Governance Organizational Culture Ethical Behavior Board Effectiveness Succession Planning Reputation Image and Branding Stakeholder Relations Integrity Management Fraud Employee Fraud Third Party Fraud Illegal Acts Unauthorized Use Operations Customer Satisfaction Scalability Compliance Human Resources Performance Gap Business Interruption Knowledge Capital Cycle Time Product/Service Failure Product Development Sourcing Environmental Efficiency Channel Effectiveness Health and Safety Capacity Partnering Trademark/Brand Erosion Strategic Environmental Scan Business Model Business Portfolio Investment Valuation/Evaluation Organization Structure Measurement (Strategy) Resource Allocation Planning Life Cycle Public Reporting Financial Reporting Evaluation Internal Control Evaluation * Executive Certification Taxation Pension Fund Regulatory Reporting Operational Budget and Planning Product/Service Pricing Contract Commitment Measurement (Operations) Alignment Accounting Information The Protiviti Risk Model was reprinted with permission to Webb Watch Corporation from Protiviti KnowledgeLeader - www.knowledgeleader.com. © 2007 Protiviti Inc. PROTIVITI RISK MODEL Comprehensive organizing framework for defining and understanding potential business risks. Why We Should Care – The Changing Landscape Rating Agencies Citizens Media Organization Regulatory Community GASB, AICPA, GAO, OMB GFOA Other external factors The Changing Landscape - Expectations Gap to Close Expectations / Standards Expectations / Standards Relative Actual Performance Relative Actual Performance Expectations / Standards Gap to Close 2002 2007 / 2008 QUESTION? QUESTION? Conflict of Interest Risk Assessment Audit Committee Code of Conduct Formal Documented Procedures Compliance Monitoring Internal Auditor Antifraud Program On-Going Training Corrective Actions Code of Ethics Well Defined Policies On-Going Communications Internal Controls Framework Governing Body Oversight Independent Audit Control Environment Enterprise Risk Management Segregation of Duties Who Should Be Involved? Everyone has a responsibility: All employees City Manager Mid-Management Department Heads City Council Southlake’s Plan: Proactive & Balanced Risk Management QUESTIONS? Call Sharen Jackson (817) 748-8042