RISK MANAGEMENT: BRIEFING TO THE PORTFOLIO COMMITTEE 04 OCTOBER 2017

1. RISK MANAGEMENT: BRIEFING TO THE PORTFOLIO COMMITTEE04 OCTOBER 2017

2. Presentation Outline • Part A – General Overview of the Risk Management Committee’s purpose, authority & reporting • Part B – Improvements/ contributors of positive audit outcomes • Part C – Progress on recommendations as at last appearance at Portfolio Committee • Part D – key risks & risk management interventions in continuously improving audit outcomes

3. General overview of Risk Management Committee (RMC) DIRCO’s Risk Management Committee is established in terms of the Public Finance Management Act, 1 of 1999 as amended, specifically Section 38 (1)(a)(i), 51 (1)(a)(i), 57 (a); National Treasury Regulations (2005) Section 27.2; National Treasury Public Sector Risk Management Framework (2010) and King III Report on Corporate Governance Chapter 4 and Batho Pele Principles.

4. Purpose of Risk Management Committee Its purpose is as follows: • To assist the Accounting Officer in discharging his/her accountability for risk management by reviewing and overseeing the effectiveness of the Department’s risk management systems, practices and procedures, and providing recommendations for improvement. • To formulate, promote and review the department's Enterprise-Wide Risk Management (ERM) objectives, strategy and policy and monitor the process at strategic, management and operational levels and providing recommendations for improvement.

5. Authority of the Risk Management Committee • The Committee shall have the requisite authority to request management to appear before it to account for their delegated responsibilities in respect of risk management. • Review any material findings and recommendations by assurance providers (e.g. Internal and External Audit) on the system of risk management and monitor that appropriate action is instituted to address the identified weaknesses

6. Reporting of the Risk Management Committee • The Chairperson of the Risk Management Committee will report the proceedings of each Committee meeting to the Accounting Officer and make recommendations concerning the adoption of risk management reports and any other matters arising from risk management processes. • The Chairperson of the Risk Management Committee or Chief Risk Officer will share the Risk Management Committee proceedings findings and recommendations with the Audit Committee at the next scheduled Audit Committee meeting.

7. Challenges • attendance of meetings by some of the high level officials is sometimes not possible due to the nature of DIRCO’s work • Slow Implementation of some Risk Management Committee’s interventions

8. PART B: Improvements/ contributors of positive audit outcome

9. Risk Management Report DIRCO has shown significant improvement in its internal control environment by implementing various risk management methods. These methods have contributed to positive audit outcome: • DIRCO has functioning Risk Management Committee in line with PFMA and Public Sector Risk Management Framework • DIRCO has developed a strategy to imbed risk management into day to day functions of the department • Continuously identifying risks in its operations through risk assessments at all its Missions and Head Office Branches • Continuously identify emerging risks as part of early warning process to avert unwanted adverse consequences • Risk Management is continuously gaining strength in the department as it’s been receiving level 4 scores on MPAT in accordance with DPME standards, which means “Department is fully compliant with legal/regulatory requirements and is doing things smartly”

10. Risk Management Committee Activities • DIRCO is constantly facing inherent ‘REPUTATIONAL’ related risks due to its mandate and demographic. • Risk Management Committee had received various risk reports through Risk Management Unit, which highlighted department’s state of inherent risk (risks without measures to control) as well as state of residual risk (risks after measures are put in place) • These reports were interrogated and various responsible managers (risk owners) were brought to the meetings to provide feedback on how they manage risks at their business units. These interventions had timeframes to ensure that each manager will be held accountable for implementation of each risk mitigation for their respective area of responsibility.

11. PART C: Progress on recommendations as at last appearance at Portfolio Committee

12. PROGRESS OF RECOMMENDATIONS BY RMC AS AT LAST APPEARANCE AT PORTFOLIO COMMITTEE • ICT INFRUSTRUCTURE (THIS IS NOW BEING ADDRESSED BY ICT STEERING COMMITTEE) • Total revamp of ICT infrastructure • STATE OWNED PROPERTIES (THIS NOW BEING ADDRESSED BY FOREIGN SERVICE BILL) • DIRCO’s responsibility for maintenance and its related budget • Professional property assessment of all state owned properties • Maintenance plans for state owned properties

13. PART D: key risks & risk management interventions in continuously improving audit outcomes

14. Key risks likely to cause recurring findings • Inadequate Assets Management • Irregular expenditure • Inadequate ICT infrastructure • Unauthorised expenditure in personnel budget • Image/reputational risk on the state of properties abroad • Inadequate planning process/misalignment of budget process

15. RISK MANAGEMENT INTERVENTIONS • Department has established working partnership with Risk Management Unit. The Unit forms part of various Committees and operational processes in order to provide proactive advice on decisions to minimise exposure to risks. • Functional Audit Steering Committee with representation from all Branches. The Committee is regularly meeting to deal with audit findings raised • Functional Budget Committee at the level of DGF members. The Committee is regularly meeting to deal with the various demands on the departmental budget, including issues relating to unauthorised and irregular expenditure • Functional ICT Steering Committee. The Committee is regularly meeting to deal with ICT challenges faced by the department. ICT costed strategy developed

16. Continues • Various Task Teams (HR, Finance and Line Function) formed to deal with the expenditure ceiling imposed throughout government • Task Team formed to deal with the structure of the department in alignment with the cost containment measures • Foreign Service Bill Task Team formed to unpack chapters of the Bill in order to put measures in place to ensure achievement/compliance • Property Management Strategy developed to deal with constant challenges faced on management of state properties abroad • We foresee/anticipate high interest in audit of predetermined objectives by AG, therefore our recommendation is that Planning Unit should work closely with Finance in order to clearly align plans with available budget thereby proactively managing “risk” of unauthorised expenditure