Wednesday, May 4, 2011

5.3.3 Internal context

The internal organizational context is (unlike the external environment) something which most organizations are able to at least influence if not control.   An organizations risk management systems operate within the parameters of the organization's culture, processes, structure and strategy.
Understanding the internal context is fundamental to any risk management activities and TECOP analysis is one of the easier ways to quickly gain this understanding.  TECOP stands for Technical. Economic. Cultural, Organizational and Political factors. Another variation of TECOP replaces Cultural with Commercial, however the significance of Cultural factors in the internal context warrants a place of it's own.

  • Technical factors include information and communications technology (ICT), R&D, equipment and machinery.
  • Economic factors include the financial management systems, cashflow, capital reserves and commercial viability of the organization.
  • Cultural factors include demographics, collective attitudes and behavior characteristics of the organization.
  • Organizational factors include capabilities, policies, standards, guidelines strategies, management systems, structures and objectives.
  • Political factors include governance, internal politics, decision making systems, stakeholders, roles and accountabilities. 

 Getting the bullet points together to establish the internal context is relatively quick and easy if you put a matrix on a whiteboard as part of a brainstorming activity, and TECOP is one of the quickest ways I know to achieve this.

Organizational Culture
The most challenging area for an organization to establish is typically the third element of TECOP analysis - culture. This area of organizational culture deserves several books in it’s own right so I’ll just mention it in passing as it’s an as yet, underexplored area. A popular definition of culture is "the way things are done around here"  and a recent public inquiry described culture as an organization’s "personality – sometimes overt but often unstated – that guides the decision-making process at all levels of an organisation" .

Many organizations have developed and implemented risk mitigation procedures to assist management and control key business outcomes both before, during and after incidents. A significant body of research is available to suggest that there is a correlation between organizational structure and culture which impacts the effectiveness of risk management solutions.  Henri Fayol  in his early management studies suggested that esprit de corps is a vital ingredient in any organization. More recently, the NSW Independent Commission Against Corruption (ICAC) stated that “...organisational culture has a strong influence on the way people (staff) act in their day-to-day work…”

Organisations often know their operational climate from observing on a daily basis or simply know it intuitively.  To measure, assess and report on deep seated drivers of beliefs, values, practices and assumptions in an organization on the other hand can be a much more challenging task. Cultural surveys, particularly a survey of risk culture, conducted by an independent expert is often the only way to really objectively understand what is going on inside an organization to drive behaviours in relation to risk.

Example of an Internal Context Statement

Approximately 20% of ABC Megagroup revenue is from gold processed at Alphaville and the XYZ mining operations in Panaland constitute a critical part of ABC’s asset base.  

XYZ maintains an office in Sydbourne and a permanent minesite camp in western Panaland known as Alphaville which is roughly in the middle of a 800 square kilometer exploration lease.  Alphaville is located in an area known as Woomerera which is between Bogabilla township and Lake Freshwater.  During the exploration season a number or temporary camps are also established as needed to support exploration activities. 

XYZ operates an ICT network using Macintosh computers and servers.  Alphaville is connected to the internet via 2 satellite connections to provide redundancy and the internal network operates via VPN over these satellite links.  All facilities have HF radio, satellite phones and internet however mobile phone coverage is not available at Alphaville.

Mining activities are conducted year round while exploration activities at Alphaville are only conducted during the dry season (April to October) as the roads and rivers in the Woomerera area become impassable during the wet season.  The minesite at Alphaville commenced operations 2 years ago and utilizes state of the art open cut technology (Ref: Appendix X: Assets). 

Two hundred and twenty staff are permanently based in the Sydnbourne office while approximately 900 to 1,000 staff are based out of Alphaville.  A recent cultural survey highlighted a strong risk management culture and high levels of morale among the workforce. 

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