Reference no: EM133583969

Question: Developing Accountability in Risk Management: The British Columbia Lottery Corporation Case Study

JACQUETTA C. M. GOY

Director of Risk Management Services, Thompson Rivers University, Canada and Former Senior Manager, Risk Advisory Services, British Columbia Lottery Corporation

This case study describes how enterprise risk management (ERM) has developed over the past 10 years at British Columbia Lottery Corporation (BCLC), a Canadian crown corporation offering lottery, casino, and online gambling. BCLC's enterprise risk management program has been developed over time through a combination of internal experiential learning and the application of specialist advice. The program's success has been due to the dedication of a number of key individuals, the support of senior leadership, and the participation of BCLC employees.

The approach to ERM has evolved from informal conversations supported by an external assessment, through a period of high-level corporate focus supported by a dedicated group of champions using voting technology, to an embedded approach, where risk assessment is incorporated into both operational practice and planning for the future using a variety of approaches depending on the context.

BACKGROUND

BCLC is a crown corporation operating in British Columbia (BC), Canada. The corporation was established by act of the British Columbia legislature in 1985. As a commercial crown corporation, BCLC is wholly owned by the province but operates at arm's length from government, enjoying operational autonomy while reporting to the minister responsible for gaming, currently the Finance Minister. All profits generated by BCLC go directly to the provincial government. The initial remit of the corporation was to operate the lottery schemes previously administered for British Columbia by the Western Canada Lottery Corporation. In 1997, BCLC was given responsibility to conduct and manage slot machines, and in 1998 the corporation's remit broadened again with additional responsibilities for table games in casinos. In 2004 an online service, PlayNow (playnow.com), was launched.

BCLC has been a highly successful organization for over 28 years, delivering over $15.7 billion in net income to the province of British Columbia. Through April 2012 to March 2013 more than $1 billion in gambling proceeds helped fund health care, education, and community programs in British Columbia (BCLC Annual Service Plan Report 2012/2013). BCLC operates the provincial lottery and instant games and provides national lottery games through the Interprovincial Lottery Corporation. Across the province, BCLC manages 17 casinos (15 casinos plus two casinos at racetracks), 19 community gaming centers, and six bingo halls through a number of private-sector service providers. PlayNow, BCLC's legal online gambling website, offers lottery, sports, bingo, slot, and table games, including online poker. BCLC employs about 850 corporate staff with more than 37,000 direct and indirect workers employed in British Columbia in gambling operations, government agencies, charities, and support services.

BCLC's mandate is to "conduct and manage gambling in a socially responsible manner for the benefit of British Columbians" with a vision that "gambling is widely embraced as exceptional entertainment through innovation in design, technology, social responsibility, and customer understanding." The organization holds the following values as key to its success:

• Integrity: The games we offer and the ways we conduct business are fair, honest, and trustworthy.

• Social Responsibility: Everything we do is done with consideration of its impact on and for the people and communities of British Columbia.

• Respect: We value and respect our players, service providers, and each other.

BCLC believes that playing fairly is a serious responsibility and an empowering opportunity. A commitment to social, economic, and environmental responsibility is central to everything the organization undertakes, and is reflected in the BCLC slogan, "Playing it right." BCLC strives to create outstanding gambling experiences with games evolving with the player's idea of excitement. For BCLC, playing is not all about winning; it's about entertainment.

THE BEGINNINGS OF THE RISK MANAGEMENT JOURNEY

BCLC began its enterprise risk management journey in 2003 with the initiation of an Enterprise-wide Risk & Opportunity Management (EROM) initiative. The impetus for the initiative was twofold - the 2002 inclusion of risk management in the British Columbia Treasury Board's Core Policy and Procedures Manual and BCLC's head of Audit Services championing the need for enterprise risk management (ERM).

As a first step, an external consulting firm was contracted to undertake an enterprise-wide risk assessment and to support the Internal Audit team in developing the skills and resources to manage the new ERM program. Interviews and facilitated workshops at management and executive levels were conducted, a risk dictionary was constructed, and the highest risks were identified. The assessment focused on inherent risk compared with an evaluation of management effectiveness to produce a gap analysis, and there was also a discussion around risk tolerance. A final report was produced (Deloitte and Touche 2003), and advice was also provided on potential next steps for the program.

Although the EROM initiative was well received, financial constraints put a hold on the subsequent business case. As a result, the plan to take the program forward through the appointment of a dedicated risk manager and funding for training of a number of risk champions was not implemented at that time.

 

LEARNING FROM THE FIRST ERM INITIATIVE

The initial assessment provided a strong starting point for the BCLC ERM program, but even though the engagement was originally intended to be the first part of a longer-term initiative, there was insufficient impetus to put the program into operation in the face of competing priorities. This is not an unusual outcome, as although using a consultant to kick-start programs can leverage experience and expertise that organizations may not otherwise have access to, using an external party contracted for a defined period of time can also lead to a project type approach, where the focus is more on getting the risk assessment completed and less on longer-term implementation. In addition, it may be easier to source short-term consultancy fees than it is to obtain longer-term resourcing commitments.

Another issue can arise where consultants bring in defined methodologies that do not easily fit with the organization's normal approach to decision making or where participants do not understand the underlying process, and so do not fully endorse and own the outcome. To overcome this issue, the consultants worked closely with the BCLC Internal Audit team with part of the stated purpose of the engagement being to build risk management expertise within BCLC.

RESTARTING THE PROGRAM-2006-2008

In early 2006, the head of Audit Services' proposal to update the 2003 risk assessment was endorsed by BCLC's executive team. Audit Services facilitated an assessment of critical strategic and operational risks facing BCLC, by developing a set of risks for analysis through consultation with the executive team, preparing an environmental scan, and concluding with a facilitated risk workshop to evaluate and prioritize each risk. The initiative was strongly informed by the successful ERM program being run at that time by another Canadian lottery organization, the Atlantic Lottery Corporation.

The intended outcome of the 2006 assessment was to inform the three-year-old audit plan, to develop new risk criteria, and to raise awareness about the importance of risk management. The success of the exercise led to the development and acceptance of a business case in August 2006 to resource a part-time risk manager, responsible for putting into operation the risk management program. This approach was endorsed by the CEO as part of an organization-wide initiative to develop and embed a high-performance culture across BCLC.