Considering Risk in Budget Reductions
This tool will help you consider the risks involved and decide among your options for reducing your budget. It will not make decisions for you, but it will help you compare the benefits and risks of each option so you can make informed decisions.
The nine steps are:
- Step 1: List possible budget reduction actions.
- Step 2: Consider potential benefits.
- Step 3: Consider risks to environment and life safety.
- Step 4: Estimate potential financial severity.
- Step 5: Consider the risk of mission impairment.
- Step 6: Consider impacts to stakeholders.
- Step 7: Consider reputational risk.
- Step 8: Determine whether separation of duties is compromised.
- Step 9: Decide which actions to implement.
Download a sample version of this tool (xlsx)
The sample version should allow you to understand how this tool displays information, how to navigate through the steps, and what types of information you will need to complete it. However, it does not contain any formulas or calculations.
The full version of this tool is available free of charge as a public service and outreach effort of the UCOP Office of Risk Services. However, we do ask that you provide us with some basic information to assist us in understanding how this tool is being used. This helps us ensure we are continuously evolving the tools in our toolkit to meet the needs of our users.
If you would like a full version of this tool, please contact us at erm@ucop.edu with the following information:
- Your name and title
- Your organization
- Your phone number
- Your e-mail address
- The name(s) of the tool(s) you would like to use
- A brief description of how you intend to use the tool(s)
Getting Started
When you open the tool, you may be prompted with a warning indicating some content is unsecured. The tool only uses one macro, which allows the data export function to work. You will be able to fully utilize the tool even if you do not enable this macro; however, you will not be able to export the data without enabling it.
Next, fill in the project information section at the top of the first page. Then save the file in a secure location with an appropriate, unique name. This will minimize confusion if multiple files are created.
Then click the “Get Started!” button below the introduction to move on to the next step.
Possible Reduction Actions
Here you will enter the size of your overall reduction goal and list actions that can be taken to meet that goal. These actions can be items which decrease expenses, or they may be ways to increase revenues.
Enter the target total reduction amount and list actions that can be taken to meet that goal. This list of possible actions should be extensive and will be used later in the remaining steps.
Potential Benefits
The actions you are considering may have positive effects in addition to their risks. For instance, it may be easier to achieve your compliance objectives if the action is implemented, or your organization may become more efficient. This step allows you to document how you are considering those potential benefits. The benefits here will be scored alongside the various risks in the final summary screen.
Customizable Scales
For most steps, you will begin by describing the potential risks, benefits, and impacts of each action using a five-point scale. Each scale can be customized to suit your organization’s risk appetite and structure.
Formula Protection
Some cells on each page are protected to prevent accidental edits which may affect the tool’s calculations. Cells containing formulas are shaded a light grey. Spaces intended to be left blank are also shaded in the same light grey. Cells where you can enter information or make a selection from a drop-down menu are filled in white. Even for cells that are protected, you are able to format cells as you wish (change fonts, styles, colors, widths, heights, alignment, and text wrapping). These types of changes should be made without removing the protection on the page.
In the “Implementation” step, if you decide to change the description of an action, return to the “Possible Reduction Actions” step and make the change there. The new description will then be reflected throughout the remaining steps.
Other Considerations
It is important to consider other types of effects of each possible reduction action. Steps 2, 3, and 4, contain spaces that are provided for you to add other types of benefits, risks to the environment and life safety and financial risks if you have identified them.
Environment and Life Safety
Each action may have an adverse impact on the environment and/or life safety. This step allows you to document how you are considering those risks.
Financial Severity
There may be adverse financial impacts associated with each action. For instance, deferred maintenance may lead to long term damage to property which would require a more expensive replacement instead of repairs. This step allows you to document how you are considering those potential impacts.
Mission Impairment
This step allows you to document how you are considering the impact of each action on your ability to fulfill your organization’s mission. The mission elements to consider include teaching, research, public service, patient care, and administration.
Stakeholders
Stakeholders may experience adverse impacts associated with each action. For example, waiting or processing times may increase. Stakeholders to consider include your employees, students, and customers.
Reputational Risk
Estimate the potential adverse impact of each action on the reputation and image of your organization.
Separation of Duties (Optional)
This step is optional and can be used to evaluate the effects of changes in administrative staffing. First, select the “Duties Matrix” button. The purpose of this form is to determine if duties are properly separated in your department and to ensure personnel changes associated with the possible reduction actions do not create conflicts of duties.
Next, enter the names of staff who would continue in the department after the possible reduction actions listed are taken.
Lastly, return to the main page by selecting the “Back to Main Separation of Duties Page” button. Indicate “Yes” or “No” by selecting from the drop down list under the “Violate Separation of Duties” column.
Implementation
This step provides a compilation of data based on your selections for actions and its implications of proposed budget changes. This page allows you to sort by Current Year, Permanent and Risk Score. Review your total risk scores and total benefit scores. Higher risk scores indicate greater relative risk and higher benefit scores indicate greater potential benefits. Whether an action may compromise separation of duties is also listed. As you choose which actions to implement, the tool provides a running total comparing the actions implemented to the budget reduction goal. Consider the aggregate and specific risks and benefits and decide whether or not to implement each action by selecting from the drop down list under the “Implement?” column.
Exporting Your Data
When you have completed all of the steps, you may export the data into a comma-separated value file (.csv) for use in the University's Enterprise Risk Management Information System (ERMIS) by selecting the "Export" button on the Implementation Step’s page.
