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Risk management tool

The Australian Tax Office (ATO) has developed a comprehensive and detailed approach to determining the likelihood, consequences and level of risk associated with employees leaving key roles.

This risk assessment tool is designed to assist managers undertaking workforce planning and succession management activities. In particular, it supports managers in determining the likelihood, consequences and level of risk associated with employees leaving key roles.

Purpose

This tool can enable you to assess the following two risk factors:

  • the likelihood of an employee in a key role leaving your work area
  • the consequence on business outcomes of this vacancy

The result of this exercise is that you will more fully understand the succession planning risk. You will then be able to determine the appropriate strategy for addressing the risk.

Discussions with a staff member using the Succession Management Discussion Tool will have provided some information from the employee that should assist during the risk assessment.

Risk assessment

Likelihood

You should make an overall judgment on the likelihood of the person leaving based on:

  • the employee’s work or career intentions
  • the demand and market value of the employee’s skills and knowledge
Likelihood rating scale of the employee leaving
Rating Likelihood description Definition to determine your likelihood rating

1.

Rare

Has no intention to leave

2.

Unlikely

Unlikely to leave, but could occur at some time

3.

Moderately likely

Some probability they will leave in next 12 months.

4.

Likely

Likely to leave, will probably occur within the next 12 months.

5.

Almost certain

Almost certain to leave, within 12 months.

Likelihood questions

Please review the following questions before making an overall judgment of the likelihood of the employee leaving.

Please note: the scores are not meant to be averaged. You should look at the overall pattern, and weight the rating according to their likely impact on the role being vacated.

Q Factors associated with likelihood of employee loss 1 Rare/Not at all 2 Unlikely 3Moderately likely 4 Likely 5 Almost certain
If you gave a rating of 4 or 5 to any of the questions, provide your comments/rationale:
1. The employee is applying for jobs currently, and/or is seeking you to be a referee. (In addition has the employee recently missed opportunities and expressed dissatisfaction with the current position)
2. The employee has said they plan to leave within 12 months, or has exhibited behaviours consistent with leaving.
3. The employee has told you their career needs and your team cannot fulfil those needs.
4. The employee has skills or attributes in demand in the organisation which are likely to present attractive career opportunities within 12 months.
5. The employee has skills or attributes in demand in the external employment market which are likely to present attractive career opportunities within 12 months.
6. The employee has said their current job is not sufficiently benefiting them, developmentally, professionally or financially.
7. The employee is having difficulty in the position and/or is not well situated in the current team.

Overall Likelihood Rating = _________________

(Please note: in forming your overall rating the scores are not meant to be averaged, rather the rating should be a holistic judgment of the all the answers)

Consequence

You should make a holistic judgment of the consequences of the employee leaving using the following criteria:

  • the type of capabilities (knowledge, skills and attributes) the employee possesses
  • the type of work being undertaken
  • the impact on revenue, reputation or capacity of the organisation to deliver.
Consequence rating scale of an employee leaving
Rating Consequence description Definitions to determine your consequence rating
1. Low
  • Capabilities are broad and widely available.
  • Successors are able to be sourced from other areas.
  • Brief training period required for successor to perform the role effectively.
  • Minimal impact to revenue or business outcomes for the organisation if the employee leaves and/or the role is likely to end.
  • Role can be redesigned or redistributed to be completed by other employees.
2. Moderate
  • A rating of 2 has some characteristics of rating 1 and/or 3.
3. Significant
  • Capabilities are specialist requiring role specific experience and not immediately available.
  • Successors are sourced from limited internal or external areas.
  • Significant training period required for successor to perform the role effectively.
  • Significant impact to revenue or business outcomes for the organisation if the employee leaves.
  • Role can not easily be redesigned or redistributed to be completed by other employees.
4. High
  • A rating of 4 has some characteristics of rating 3 and/or 5.
5. Severe
  • Capabilities are highly specialist in nature, requiring qualifications and/or extensive role specific experience.
  • It is difficult to source successors from other areas in the organisation or from the external labour market.
  • Extensive training period (in excess of 12 months) required for successor to perform the role effectively.
  • Negative impacts to revenue or business outcomes are likely to occur for the organisation if the employee leaves.
  • Role can not effectively be redesigned or redistributed to be completed by other employees.

Consequence questions

Please review the following questions before making an overall judgment of the consequences of the employee leaving.

Please note: the scores are not meant to be averaged. You should look at the overall pattern, and weight the rating according to their likely impact on the employee.

Q Factors associated with consequences of employee loss 1. Low 2. Moderated 3. Significant 4. High 5. Severe
If you gave a rating of 4 or 5 to any of the questions, provide your comments/rationale:
1. Business outcomes or business reputation will be adversely affected if the employee leaves and is unavailable to provide advice to a successor
2. The role and current work will remain relevant and need to be done for the next 12 months
3. The capabilities that the employee possesses are highly specialist in nature, requiring qualifications and/or extensive role specific experience.  
4. The employee’s current work can not be redesigned or redistributed to other team members or teams.
5. It would take more than 12 months of training and experience for a successor to become as effective as the employee
6. In the organisation there are very few potential successors for the employee and the role.  
7. In the external labour market there are very few potential successors for the employee, or you would be unlikely to be able to seek external replacement given financial pressures on your capability/line etc

Overall consequence rating = _____________________

(Please note: in forming your overall rating the scores are not meant to be averaged, rather the rating should be a holistic judgment of the all the answers)

Risk rating matrix

Now map your Likelihood and Consequences ratings onto the Risk Ratings Matrix below.

Consequences 5. Extreme High High Severe Severe

Severe

4. Very High High High High Severe Severe
3. High Significant High High High High
2. Medium Moderate Moderate Significant Significant Significant
1. Low Low Low Moderate Moderate Significant
1. Rare 2. Unlikely 3. Moderate likely 4. Likely 5. Almost certain
Likelihood

Overall risk rating = _________________

Next steps

You have now completed the risk assessment and allocated a rating for each of your employees. You may now wish to review the levels of risk for your team as a whole for team and workforce planning. Put in place actions to address each of the most significant risks identified through the analysis.

Risk assessment criteria

These criteria can be used to assess the relative succession risks of employees and/or of key positions or roles.

Consequences:

  • Impact on business outcomes and/or reputation –What are the business risks associated with the loss of the employee in question, or if the position or role is not filled with a fully capable employee?
  • Uniqueness of capabilities - What is unique or specialist about the skills, knowledge, attributes or other characteristics of the employee, or are required for the position or role, which contributes to achieving business outcomes?
  • Availability of capabilities - How readily available are the required specialist capabilities in the internal and external employment market? What are the likely timeframes before a replacement can be fully effective in the role?
  • Work timeframes - How long will the work (that the employee, position or role contributes to) remain a priority?
  • Mitigation strategies - How else could the work be completed- e.g. restructure or redistribute the tasks, technology, outsource? What is already in place to mitigate risks?

Likelihood:

  • Direct intentions: To what extent is the employee is actively seeking other employment opportunities and/or career options?
  • Professional needs: How well are the employee’s financial, developmental and professional self interest needs being met in their current position?
  • Personal needs: How well does the employee’s current position match their personal values, beliefs, and lifestyle balance?
  • Marketability –How marketable are the skills, knowledge, attributes or other characteristics of the employee, that would make them an attractive employee in other parts of the organisation and the external employment market?

Other considerations:

Proven performance - What evidence indicates that the employee is a valued contributor, and/or that the position or role is critical to operations?

Costs -What are the relative costs of implementing the various succession strategies (e.g. retention, versus using contractors or employing and training a replacement)?

Use of these criteria ensures that meaningful conversations can be held to justify and compare the risks across different areas and levels of the organisation, and to focus resources on managing the highest priority risks.