Case Study:  Risk-Based Resource Allocation


Situation

The Corporate Security department of a Fortune 100 company was facing budget and headcount reduction mandates for the up-coming fiscal year. Unsure of what would ultimately be decided on, the department had been asked to identify the additional risk that the company would assume at different levels of budget reduction. Bellwether was asked to design a methodology to accomplish this and to identify risk assumption alternatives for the company to consider.

Approach

A project team was assembled that included Bellwether consultants and senior representatives of all the Corporate Security functions within the department.  Each function was analyzed to identify the risks being mitigated and the service levels associated with each (e.g. visitor processing).  A risk prioritization scheme was developed for the company that enabled the team to triage all the major threats the company faced into key risk categories.  Each risk category was then prioritized from an enterprise perspective and the cost associated with each mitigation program identified.  Costs were then compared to risk priorities and service levels on an incremental basis to provide a continuous framework from which to assess the effect of different levels in resource reduction.

Analysis & Results

The Corporate Security department provided many services to the company and its employees that were offered as part of various mitigation programs and could be scaled back without the company having to assume significant additional risk.  Examples of those identified include: staffing levels on visitor desks, temporary badges for employees, office let-ins, after-hours escort, personal safety training, etc.  However, reduction in these services did have implications for business productivity that had to be factored in.  Some programs had marginal elements associated with them that were identified and staffing and travel expense could both be scaled back slightly without significant risk assumption.

Benefits to Client

The company’s senior leadership team was provided a continuum of options from which to choose depending on the level of budget reduction considered. At 5%, minimal additional risk would be assumed and most services levels could remain comparable. However, at 15%, there was a trade-off to be made between lower productivity and the assumption of additional risk for the company; one or the other would be affected.  At 25%, both risk and productivity would be affected although the mix was adjustable.  The company found this a very valuable exercise as it was able to clearly understand the services provided and the risks mitigated by them. The decision framework empowered them to choose more rationally and, ultimately, they opted for a relatively smaller percentage as they could clearly comprehend the value that would be lost at the higher alternatives.