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Solutions to tackle aged care’s unique risk challenges

Risk management should be holistic and encapsulate an entire organisation’s operations

By Megan Motto

Aged care providers are facing increased market and regulatory pressures as population demographics press up against affordability issues.

This is not an excuse for compromising quality of care and putting the health of our senior citizens at risk. Truly sustainable businesses are those which put their consumers front and centre – it is no different in the aged care sector.

The Royal Commission into Aged Care Quality and Safety has ruthlessly exposed some visceral examples of patient maltreatment and abuse. For the organisations already exposed in these allegations, the brand damage may already be done. Oakden no longer exists for this reason.

What is it about the aged care sector that carries so many unique risks, and how can you make sure your organisation doesn’t meet the same fate?

Firstly, it’s worth remembering the aged care sector is almost completely reliant on government funding. The Government spend on aged care was around $18bn in 2017-18. That funding accounts for 95 per cent of all funding in the sector. So when government policy changes, or budget cuts bite, this is a substantial risk to business sustainability, especially for smaller operators.

It is also a scattered, and diversely operated industry. As at 30 June 2018, there were 886 organisations providing residential aged care through 2,695 services, alongside another 873 organisations providing home care services. These run the gamut from small church-based not-for-profits run by volunteers, all the way up to multi-national health insurance providers.

216,000 Australians are in residential or flexible aged care – 55 per cent of those placements are provided by not-for-profits.

As more and more baby boomers retire these pressures will increase.

The question then becomes, how does the industry maintain high quality customer care, while also remaining financially sustainable long term?

The temptation to treat risk management planning as a compliance based box-ticking exercise has been proven problematic. When the cost-profit margin is so slim, the royal commission has exposed too many operators doing the ‘bare-minimum’ to pass regulatory assessments.

Boards need to be aware that pressures flow down to middle and lower management, and indeed to the day-to-day workers serving the customer. The temptation could be to hire the cheapest labour you can find, cut back on staff resources, and put off investments in customer services and facilities.

Risk management needs to be holistic and encapsulate an entire organisation’s operations. For many smaller operators, especially those staffed with volunteer board members, or part-timers, industry experience in these areas may be limited, or immature.

Boards need to be leading regular culture and risk reviews, running regular audits of their operations, and monitoring staff conduct first hand. Or else, sooner or later something will break.

To add pressure, the Corporations Act’s new strengthened whistle-blower laws come into effect on 1 July, and already aged care royal commissioners Richard Tracey and Lynelle Briggs have made very strong statements around protecting whistle-blowers in the industry.

The Aged Care Quality Standards, also effective from 1 July 2019, state that aged care providers must include organisation-wide risk management processes in place to attain accreditation.

All of these processes will need to be constantly reviewed and improved. Reporting lines need to be clear, effective and unfiltered – whether that line goes to the CEO, or as a semi-independent committee reporting separately to the board.

As tough as all of the above sounds, it is also worth considering this project as an opportunity. Use it to facilitate change across within the entire organisation as part of a holistic strategy.

We’re here to help – if you want to learn more about how the Governance Institute is working with LASA and aged care providers to address these challenges, please join us at one of our workshops.

Megan Motto is chief executive of Governance Institute of Australia.

Workshop: Reputational risk in the aged care sector

Workshops around Australia – July 2019

Your reputation is just one of many risks your organisation faces during these turbulent times. So many risks have the potential to damage an aged care organisation’s reputation – data breach, failed accreditation or a poor customer or family experience, are just a few examples. Learn how you can manage your reputation when these risks threaten your organisation.

Learn how you can manage your reputation when these risks threaten your organisation.

You should attend if you are a:

  • leader or senior manager working in aged care
  • director or chair
  • risk professional

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About Governance Institute of Australia

With a membership of over 7,500 company secretaries, governance leaders and risk managers from some of Australia’s largest organisations, Governance Institute of Australia is the only fully independent professional association with a sole focus on governance excellence. For 110 years, our education, research, advocacy, and support networks have provided cutting edge governance and risk management advice to Australian business leaders from all walks of life. We celebrate Australia’s successes, and challenge it to be even better. Learn more

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