Risk Considered by Suffolk County Council to Manage the Fire and Rescue Services - Case Study Example

Risk Considered by Suffolk County Council to manage the fire and rescue services Submitted to: Anthea Grange Submitted by: Hamdan Hamad Content Introduction 3 Operational Boundary 3 FRS Consideration 4 Safety Margin 5 Characteristics of FRS 6 Risk Considered 7 Opinion 11 Conclusion 12 References 13 Introduction Finance is an important part for every company. Organisations need to evaluate it properly. Important measures need to be in place to check its accuracy. It helps to take better decision. Strategies are better executed. Companies need to see that budgets are set. They need to operate within those. All the risk should also be accounted. This will bring better results. Suffolk County Council has ensured that different measures to check risk are considered. They have also disclosed all vital information thus helping everyone associated with the company. Different measures are in place to see that risk is reduced. Suffolk County Council has also looked that they keep abreast to latest development. This has reduced the risk they encounter. Suffolk County Council has also used various techniques like NPV which is helping them to ascertain projects. Even, the new projects have looked into every angle and they have ensured that all risk associated are encountered. This has resulted to boost confidence and help them reduce casualties and perform better. Operational Boundary Operational Boundary is “determining the direct and indirect earnings associated with the operations owned or controlled by the company”. (Mohan, 2003) The Fire rescue service calculates this after taking into consideration the inflows and outflows. This helps to measure the boundary correctly. The operational boundary is “calculated before hand by planning what needs to be done in the future”. (Mohan, 2003) It is calculated by “considering the capital and revenue receipts and payments and also after considering the provisions and long term debt”. (Williams, 2003) It is calculated through the following formula Calculating the maturity loans + the loans which will be replaced by payment and new taken + the fund for capital usage + the revenue balance which is (earned-spend) + the financing required for capital investment + the statutory and voluntary requirements This is ascertained beforehand. The authorised capital is calculated after calculation of operational boundary. “It is calculated at a certain percentage over the operational boundary so that the unexpected expenses which might arise due to unfavourable circumstances are taken care off”. (Williams, 2003) A rate of 5% is normally set. FRS Consideration The Fire and Rescue Services has to consider various factors. This helps them to plan properly. It also helps them to decide whether they will be able to grow. The FRS needs to consider various factors. They are Setting the operational boundary correctly. This will help to ensure that “the planning doesn’t goes wayward as the department has to manage their expenses beforehand and it also helps to determine the spending pattern”. (Williams, 2003) Seeing that the authorised capital is set correctly. The department needs to ensure that “they set the limits a bit higher so that any expenses which has not been accounted for if it arises is managed in a proper way so that the department is able to meet its expenses easily”. (Williams, 2003) Look that they “comply with the rules and code practise”. (Williams, 2003) it is seen that the FRS has looked into it. See that the “changes in the interest rate is accounted for because a change in the fixed and variable interest rate can bring about a change in the estimated expenses so they need to account for it so that they don’t face a credit crunch”. (Williams, 2003) The FRS has accounted for it. It has taken into consideration this. See that the “required limit is set for the borrowing which will mature and need to consider both the upper and lower limit as it will help to check the fluctuations and also help to manage the requirement in a better way; thereby strengthening the forecast” (Williams, 2003) FRs has followed this and is looking to do that. The authority also need to consider the “sum invested for more than 364 days by getting the proper approval from the required authority in relation to it so that the safety of the funds are considered”. (Williams, 2003) FRS has been considering this and has been accounted. Safety Margin This can also be seen from the safety margin calculated. Safety Margin for 2008 Operational Boundary = 11.698 million Authorised Limit = 12.5 million Proportion of authorised limit = 11.698 / 12.5 = .935 So, safety margin = 100 – 93.5 = 6.5% Thus for the year 2008 Suffolk County Council operates within the safety margin and is safe. Safety Margin for 2009 Operational Boundary = 14.157 million Authorised Limit = 15 million Proportion of authorised limit = 14.157 / 15 = .9438 So, safety margin = 100 – 94.38 = 5.62% Thus for the year 2009 Suffolk County Council operates within the safety margin and is safe Safety Margin for 2010 Operational Boundary = 16.419 million Authorised Limit = 17.5 million Proportion of authorised limit = 16.419 / 17.5 = .9382 So, safety margin = 100 – 93.82 = 6.18% Thus for the year 2010 Suffolk County Council operates within the safety margin and is safe Thus, for all the years we see that Suffolk County Council is operating above the safety level. This is a good sign suggesting that “they have been able to have sound policies and their implementation for all this has been good”. (Graham, 2007) Characteristics of FRS Fire rescue service has certain characteristics. It considers all the rural and urban both while imparting service. Their characteristics which Suffolk County Council also comply are Considering “equality between rural and urban population” (Even, 2004) while imparting service ensures that services matches. Having “a system in place which looks at delivery, scrutiny and review of priorities and diversity”. (Even, 2004) Carrying out both “retrospective and prospective assessment” (Even, 2004) for urban and rural All “data on services are accessed with standards” (Even, 2004) which is same for rural and urban Risk Considered The Fire and Rescue Services has many risk involved. Care need to be taken to counter those. The risks involved in Fire and Rescue Services are Business risk: It is a circumstance “that has a negative impact on the operation of the company and maybe due to internal or external factor”. (Tatum, 2009) Suffolk County Council needs to reduce this. This can be managed by “calculating the various ratios which help to manage cash, having proper debt financing options and insuring against the various risk involved”. (Filisko, 2009) This risk plays a huge role. Any changes in the business risk will affect it. It will also affect the service rendered. Financial Risk: It is defined as “the risk associated due to the inability to meet the financial obligation”. (Green, 2007) This affects the services. This needs to be checked. Since, they are rendering services for the community its importance is high. This risk can be reduced by calculating the Net Present Value. Also different cash flows calculations will help. They need to manage it. They need fund for their service. Shortage of funds will affect them. They need to be largely prepared to meet it. They need to manage and proper strategy based on it. Physical Risk: The risk here for the “fire service tender man are their life which they might lose while rendering service so they need to be careful and see that proper precautionary measures for safety are in ace so that physical life doesn’t get hampered”. (Mohan, 2003) Economic Risk: It is “the danger that economy can turn against investment” (Little, 2009) raising alarms for FRS. They need to manage it to get funds. They need various objects. Not having one can hamper. Safety could be at risk. Thus it makes it a raising concern. Political Risk: This is the “risk associated with a change in government” (Mohan, 2003). This plays little part. No government makes rules which hamper the safety. Rules are infact made to help. This has helped Suffolk County Council to perform better as they get proper help. Environmental Risk: FRS has to face it. They need to perform their duties seeing that environment is not hampered. They need to ensure safety. Like, forest fire affects environment. Suffolk County Council takes measure to bring this risk under control. Suffolk County Council has considered this risk. This has helped as by doing so the department was able to come up with service. Below is seen the different risk which Suffolk County Council faces and how they have encountered those. Economic Recession: With recession engulfing the entire globe this risk is huge. Measures have been taken to tackle it. We see that a “recession fund of 3 million has been created to tackle the rising demand of the services and seeing that recession doesn’t effects it”. (Statement of accounts, 2008-09) A summit has also been held for it. It has been seen that this doesn’t affect their services. Disclosure of transactions: Suffolk County Council has disclosed transaction. This has ensured transparency. It has resulted in getting higher operational boundary. It is seen that they have “set a disclosure of transaction of amount arising more that .1 million thus ensuring the funds are not misused”. (Statement of account, 2008-09) This has ensured that people have confidence. This has also resulted in getting funds. Provisions: Provisions have been made. This is done to meet contingencies. This also helps to meet the insurance expenses of service man. It has resulted in ease. Service men are more focussed. Their fear has reduced. They are able to save more lives and deliver service that will help society. Reserves: Suffolk County Council has ensured that they have reserves for “capital adjustment, pension, general and revaluation” (Statement of account, 2008-09). This has ensured funds for the present and future. It has also looked in service men who sustain injuries. This also looks into the fact that the salaries levels are maintained. Credit Risk: “It arises from deposit with bank and financial institutions as well as other sources like customers”. (Statement of account, 2008-09) They have managed it well. The credit risk has been diversified. Suffolk County Council has also been able to get good rating for it. “A limit of 25 million has been set which has ensured that funds are invested in different varied fields so that the credit risk gets diversified”. (Statement of account, 2008-09) The accounting statement also reflects that by doing so they have been able to control well. This has ensured that service man gets proper equipments. It has ensured that the quality is good. Also, diversifying has made them concentrate harder. Safety has been ensured and it has improved shareholders return. Liquidity Risk: This is under control. The statement also shows that there is no concern in relation to it. The strategy hare has been to “ensure that no more than 40% of loans mature within three years through a combination of careful planning and repayments”. (Statement of account, 2008-09) This has ensured liquidity. For this, the trade payables have been well maintained. The receivable are under control. This all has been due to good policy. Tightening measures and transparency has ensured it. Interest risk: The movement has been kept under control. It is seen that measures have been taken to ensure that “borrowings are not carried at fair value so that the gains from this are not reflected and it is also ensured that not more than 50%o of the borrowing is in the form of variable rate”. (Statement of account, 200-09) This is done on a quarterly basis. Even management team has been built. It has ensured that they are on their feet and the work is done in the correct way. This has a huge role to play. This could also affect the operational boundary. Having proper measure has also helped in safety margin. It has ensured that the interest is within achievable limits. Price Risk: Suffolk County Council has managed it well. “Not investing in equity shares have ensured that the fluctuation of the capital is reduced and since their task is to render service it is done without any failure”. (Statement of account, 2008-09) Insurance Arrangement: Having insurance of fire men is essential. It makes their family secure. This has ensured that fire men can work towards saving more life knowing they are safe. This has also ensured more safety equipments and looking for safety. Thus, we see that Suffolk County Council has accounted for this risk. It has been done from the view point of everyone. Even the fire fighters have been considered. The statement of accounts also suggests that it has ensured that conditions improve. This has resulted in taking more fierce jobs. The safety of life has been given priority. With insurance even the family has been considered. Having equipments to fight and save has been a priority. It is also highlighted that all the accounting rules has been complied with and Financial Reporting Standard has been maintained. Opinion I feel that the Suffolk County Council has complied with most risk. It has taken care of it. Also measures have to taken to reduce it. The fact that they are operating within the operational limit sends a positive signals. It shows that strategies have been sound. Also having disclosure has helped the company. The projects on which they are working have been disclosed. The Suffolk County Council has looked into many risks. All this have been accounted. It is also seen that they have used ways to reduce it. Overall, the performance seems satisfactory. There are still certain areas where they can work on. Price risk is an area they need to work on. This will improve efficiency. Also, providing service will be better. This will also ensure that people have more confidence. Conclusion Financial management has become an important aspect. It is used while planning. It helps to gauge the funds a company has. It also allows execution of plan. This is helping Suffolk County Council get equipments. This is also helping them to get latest equipments. This can be used to reduce the casualties. It will also help in developing techniques. Financial management thus will see that limits are set. It is helping to perform within those. Suffolk County Council by using this has been able to give direction. It has been able to do things in a positive way. References Even S, 2004, “Fire and rescue service: local, regional and national responsibility”, Improvement and development agency Filisko G, 2009, “ways to reduce business risk”, Bankarte.com Graham B, 2007, “The margin of safety”, Berkshire Hath way and Value Investing Little K, 2009, “Economic Risk”, the New York Times Company Mohan J, 2003, “Fire and rescue services”, Report on fire services Williams C, 2003, “The future of fire services: reducing risk, saving lives”, Independent review of fire services Tatum W, 2009, “what is business risk”, retrieved from , 2010 Read More