Risk Profile: Financial – Costs

Risk Profile: Financial – Costs (PDF version)

This risk relates to risk of limited capital funding sources, failure to align costs with revenue streams to ensure financial viability of the organization, inappropriate coverage or inaccurate assessment of exposure. This could have significant impact on operations and potentially impact the ability to offer a specific service or impact program areas which could affect patient care. This document contains information entered by your peers in the Risk Register application to help you manage this risk.

Ranking/ratings[1]

  • Likelihood – average score 3.20
  • Impact – average score 2.80

The Risk Register allows for risks to be assessed on a five-point likelihood and impact scale, with five being the highest.

Key controls/mitigation strategies

  • Ensure robust accounting and capital budgeting processes and purchasing policies and procedures (e.g. pre-approval of expenditures, segregation of duties, approval authorities, etc.)
  • Develop short-term and long-range financial plans to:
    • anticipate cost pressures
    • determine change management strategy
    • establish mitigation strategies and monitoring mechanisms
  • Monitor financial statements and variances:
    • develop and implement a standardized process for monitoring monthly variance reports
    • send monthly income statements and financial variance reports to Functional Center Directors for their areas
    • hold monthly status meetings where the Directors and CEO review and discuss unfavorable variances
    • develop action plans/strategies to address and recover from unfavorable variances
  • Ensure timely reporting of financial performance by the Finance Committee to the Board of Directors including recommended action plans
  • Manage potential financial risks associated with funder agreements and other contracts
  • Ensure facility maintenance and replacement schedules are in place to mitigate unexpected facility-related costs
  • Build in efficiency targets for consumables to offset inflationary pressures
  • Continuously explore opportunities for cost-saving initiatives, revenue and funding optimization, innovation to provide exceptional patient care with efficient staffing models

Monitoring/indicators

  • Corporate Auditor review of controls
  • Annual audit of financial statements performed by independent auditor
  • Monthly review, analysis and reporting of financial variances
  • Regular financial reporting to the executive team and finance department to ensure contingency budget is not exceeded
  • Capital dollars included in financial statements, current ratio, working capital
  • Regular reporting on key indicators such as total margin and current ratio
  • Timely completion of quarterly funder reporting
  • Regular review of contractual agreements to ensure:
    • they are priced competitively
    • they operate within agreed upon budget
    • compliance with legislative requirements
    • gaps and opportunities are identified and addressed

[1] As of January 1, 2018

Note: information presented in this document has been taken from the shared repository of risks captured by HIROC subscribers participating in the Integrated Risk Management program.

© 2018 HIROC. For quality assurance purposes.