Crisis What Crisis?
Risks and challenges for industrial and transport heritage
Tim Bryan
Those of you familiar with Douglas Adams classic science fiction comedy 'The Hitchhikers Guide
to the Galaxy' may remember that this book and its sequels were based around the premise of
an electronic guide which tells all you need to know about 'Life the Universe and Everything'.
Helpfully, the guide had the words 'DON'T PANIC' written in large letters on its front cover, and
I hope that today you will also take this advice, despite the fact that the subject being debated
at today's meeting is probably not the most upbeat one ever covered in an ABTEM seminar!
It is a truism to say that the world of industrial and transport museums and heritage railways
has changed out of all recognition in the last quarter of a century, but then so has the 'real'
world in which these organizations operate; 25 years ago there was no internet (hard to believe
I know) – there were no mobile phones either unless you were a city trader (here my teenage
children are disbelieving). It's probably true to argue that we have all become far more
'business-like' and professional in the way we now operate, largely as a result of the avalanche
of regulation and legislation that we now have to comply with in order to continue to run our
museums and heritage venues and of course the greatly increased expectations of our
customers, passengers or visitors. I don't want to get into a debate here about what has been
lost with all these changes – I'm sure we all miss the seemingly rather more relaxed way in
which we operated in years gone by, but we have to accept that the world has changed.
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The subject of today's seminar is about 'surviving in difficult times' and I guess that another
debate could be had around whether we now live and work in a more difficult and dangerous
environment than our predecessors. Recent events in Japan remind us that the world is and will
always be a dangerous place with disaster is never too far away, although maybe the 24-hour
news culture we now live in has made us rather more aware of these events than we might
have been in previous years. It's probably true to say that global terrorism has made us far
more aware of security issues, although I'm sure many of us here are old enough to remember
the era of IRA bomb threats and the uncertainty and disruption these caused.
Leaving aside natural disasters like earthquakes, over which we have no control, the growing
attention now paid to man's effect on the climate through global warming (and you can debate
that one somewhere else too) means that planning for extreme weather events is something
we now bear in mind far more than previously. As our later speakers will be dealing with the
effects of natural or man-made physical disasters such as flood or fire, I don't intend to spend
time highlighting these kinds of risks here. What I would like to do however is to focus on that
word RISK and to briefly outline some of the other risks facing us as we try to do the things we
actually want to do as volunteers or paid staff – running our museums, railways and heritage
facilities and allowing the public to share our passion and enthusiasm.
My dictionary defines risk as 'the possibility of incurring misfortune or loss' – which I believe
neatly sums up the topic being discussed today. I'm sure that most, if not all of us are now
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familiar with the process of risk management and risk assessment so I won't labour the point
here, since you can find literally hundreds of pages of information in both print form and on the
web from organizations such as the Health & Safety Executive and the Charity Commission. I
have mentioned the latter organization as their emphasis is not just on the physical threats and
hazards facing organizations but also the legal, economic, social and technological factors that
pose a risk too. The title of one of their documents is 'protecting charities from harm' and I
guess that that is what today's topic is all about. I appreciate that not all the organizations
represented here today are charities but the sentiment still applies!
The very nature of many of our collections makes risk management an intrinsic part of what we
do, largely as many of the items in our collection are operated for the public. There has been a
huge amount of work already done by organizations such as the Heritage Railways Association
and railways and industrial museums themselves to reduce risks and danger to the public,
volunteers and staff through the operation of heritage assets. Some members may remember
that we discussed this as part of a joint seminar run with the Inland Transport SSN last March at
the National Railway Museum. I also know that our colleagues in the stationary steam engine
world are also acutely aware of these issues and are running a seminar on this topic at Kew
Bridge Steam Museum on 27 May. I'd like therefore to leave this aspect of risk for another day,
and perhaps another seminar, and concentrate on some of the other risks and challenges facing
us.
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In compiling this cheerful list of potential calamities, I've made use of information from the
Charity Commission web site and the kind of Risk Management Analysis my own organisation
the British Motor Industry Heritage Trust has to carry out annually as part of its Charity
Commission return. For those of you interested in the detail, this is a provision of the SORP
(Statement of Recommended Practice) 2005 legislation which requires charities to supply a
statement confirming that major risks to which they are exposed have been reviewed and
systems created to mitigate these risks. As you'd expect with a document linked to annual
accounts there is a heavy emphasis on financial risk but the list, although not exhaustive does
include operational factors that most people can identify with.
Any assessment of risks for heritage organizations like ours must of course take account of both
internal operational and management issues and external factors nationally and internationally
that might impact on us. I hardly need remind everyone that in the last couple of years we have
gone through a catastrophic banking crisis and resultant economic slump, a change of
government, public spending cuts on a scale not seen for decades, and record oil prices! The
Charity Commission advice is to use a PESTLE analysis to help think through issues. For those
unfamiliar with the term this is a management tool that allows you to take account of Political,
Economic, Social, Technological, Legal and Environmental factors in measuring risk. Rather than
go through this list in any great detail, I've divided up the risks into more practical categories
that include many of the factors that a PESTLE analysis might reveal.
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The first area of risk is in Governance and Management. There has been a lot of work done in
recent years to help museums and heritage organizations manage themselves better both at a
Trustee and operational level but it is patently obvious that without good leadership and
management organizations can soon find themselves in trouble. For many museums run as
charitable trusts, the effectiveness of their Trustee body is a key factor. How well does it
function? Does it have the right mix of Trustees with the skills needed to help the organization?
Are the Trustees clear about the objectives of the organization and are they committed to
these? I am sure that all of us know of museums or railways where governing bodies are rife
with dissension and personal agendas and ultimately this kind of activity weakens the
effectiveness of organizations. For those of you representing local authority collections, I know
that you face an entirely different set of problems and issues, with the elected members who
effectively govern you subject to a very different process of selection!
How a museum or heritage body is managed on an operational level is also key to reducing
risks. With the right management team and staff an organization can achieve much, but a
dysfunctional team can be disastrous. The financial pages have been full of companies that
have failed spectacularly through poor management and leadership. One factor not always
considered is succession planning – losing an experienced member of staff with key skills and
contacts can cripple and organization. Nobody is irreplaceable, but it takes time to fill the void
left by key staff and in the interim it will have an impact on your business with financial
consequences.
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The actual process of running our museums or railways is of course full of risk, but in the kind of
financial environment we now find ourselves in, the risks have probably never been more
serious. Maintaining the organization as a 'going concern' has become the most important
factor in the difficult trading conditions we now operate in. Apart from the general economic
situation, which clearly impacts on what we do, I've also noted a number of other risks in this
area, although there are no doubt some specific to your own business. As someone with a
curatorial background, maybe I am not the most obvious person to talk about financial risks,
although I would say that my Finance Director at Gaydon has trained me well! Most of the
following may seem blindingly obvious but judging by the way some businesses operate,
perhaps not so!
Starting with budgets – are they realistic and based on accurate projections? Are reporting
systems in place to allow them to be monitored and managed? Is cash flow well-managed?
Good credit control should help with this, and it helps to employ someone with terrier-like
determination to chase payments. One area of concern to museums and heritage railways is
that of managing cash flow during grant funded activity. Many entering into the HLF process do
not realize that for larger projects, those receiving the grant have to pay up front for work
before claiming back the amount owed from the funder. This may be fine for larger
organizations such as local authorities or Trusts with substantial reserves, but for smaller bodies
it may entail a bridging loan from their bank!
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Maintaining sufficient levels of reserves should also be considered – the charity commission
recommends a minimum amount to be retained to enable a business to continue to trade if
disaster strikes. Just thinking about what you would do if you lost your major source of income
is a salutary experience – business interruption insurance is one option, but not everyone can
afford this.
A closely linked factor is also to mitigate risk where possible by reducing
dependency on particularly dominant income sources, something of great relevance to Trusts
who rely on commercial 'non-charitable' activities like catering, conferencing or property to
survive. In an ideal world, maintaining a balance of income streams is obviously the best way
forward!
A crucial aspect of maintaining sustainability and reducing risk is by maintaining customer
satisfaction – clearly if visitors to your site have a good time, they will tell their friends about it
and you may well get further visits and generate secondary income in your shop and cafe. The
down side is of course if they do not enjoy their trip, then you could face complaints, bad
publicity and even negligence claims if you run commercial activities. The internet is now a real
factor in this area, since the influence of web sites like Trip Advisor and the multiplicity of
enthusiast networks and chat rooms mean that bad PR (whether justified or not) can quickly
spread.
Another risk is competition – this may seem obvious, but attractions like ours need to
constantly benchmark with other similar venues to ensure that not only the kind of offer we
provide customers with remains of a high quality, but also pricing is competitive.
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There are also fixed costs which may pose a risk to organizations like museums and railways.
Leaving aside utilities like gas and electricity, the most obvious of these may be pension
commitments. The well-publicized difficulties experienced by large companies in sustaining
staff pension contributions are perhaps bigger in scale than those that might be faced by
charities but they nevertheless need to be considered as they will still impact on the balance
sheet.
An increasingly expensive fixed cost is that of insurance. For even a small business this will
include public liability, employer liability, buildings and contents and vehicles and even business
insurance. Ensuring that you have the correct cover, and that your insurer understands not only
your business but also the nature of the risks faced is vitally important, something we will hear
more about this afternoon.
In the current period of 'austerity' as the press has dubbed it, there is little doubt that
government policy can have a huge influence on the risks faced by museums. Increasing VAT to
20% is a very obvious example of this, but changes in taxation and employment law can also
significantly affect the way we run our museums and railways. Compliance with the huge raft of
laws and regulations imposed by government are a key factor to be considered since noncompliance could result in fines, penalties, legal action by customers and ultimately loss of
reputation and income. I've listed just some of the kinds of legislation here, but I'm sure that
you can add in lots more!
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One aspect of regulation that has increased considerably in recent years is that related to the
Green agenda. We have all got used to the whole idea of recycling our rubbish at home into
various bins and bags, but for our museums and railways, larger environmental issues can pose
considerable risks, both financially and in terms of our public profile and reputation. This is a
topic that will not go away, and as a movement we will need to be able to address public
concerns about pollution and waste in future years. Many of our exhibits either run on fossil
fuels or used to do so, and we may have to face up to the fact that one day public perceptions
of steam engines and motor cars may not be so sympathetic, with a consequent effect on the
viability of our collections. Until then, we should do our best to mitigate the risk and have good
environmental policies in place to deal with resource use, recycling and waste disposal.
The security of a museum, railway or attraction is another clear risk, with damage or theft of
operational or heritage items a possibility – ensuring that the fabric of your venue is secure, and
that alarm and CCTV systems are in place is only part of the story. There are other assets that
many museums own that if lost can have serious consequences; the infringement of intellectual
property rights can be a big issue, particularly to organizations with photographs and film
collections. I know that for those without access to what can be expensive legal assistance this
may be difficult. One area of security not often considered by museums is that of data
protection. Many collect personal data, but not all store it securely – fines for a serious breach
of the Data Protection Act could potentially ruin an organization. A further thing to consider is
the possibility of loss through fraud, either externally or internally – well publicized cases of
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staff embezzling their employers are not difficult to find, so ensuring that good audit
procedures are in place is vital.
Employment issues need to be thought of as considerable risks even for those bodies that do
not have any paid employees. Therefore, a good knowledge of employment law is vital, or
access to a specialist advisor who does is an alternative! I've listed on the slide here just some
of the issues that might threaten the survival of a business if not properly handled. Health &
Safety is perhaps the most obvious, since it has implications for the public too. Having the
correct procedures and training in place is clearly extremely important. A more recent issue
which has serious ramifications is of course Child Protection. The potential bad publicity and
loss of income surrounding an incident involving children could be catastrophic.
Technology also plays its part in the whole risk management issue. The whole area of IT is
understandably a minefield and ensuring that your systems are fit for purpose in the long term
is not easy. I'm sure many in this room have seen the development and obsolescence of a fair
amount of computer technology in their lifetime – data storage is a great example: who
remembers computers with large floppy discs that were in turn replaced with small floppy discs
then CD drives? USB sticks now appear to be the current favorite for now. Just how far we have
come can be gleaned from the fact that the computer on the Lunar module that landed on the
moon in 1969 had a memory of just 25k – what Neil Armstrong would have made then of my
iPod that has a 60GB memory (just to store music) shows how quickly technology is
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progressing. The rise of Face book and Twitter also poses challenges for us – what is coming
next? The issue of technology includes office technology and data storage and web site hosting.
Given that such a high percentage of visitors now use the internet to plan a visit, what would
happen if your web site crashed? Do you have a back up arrangement?
The SORP-based risk analysis does not really deal with other risks to our collections, the life
blood of our organizations. I've already mentioned the issues surrounding the operation of
industrial or transport collections but we should not forget the day to day care, storage and
display of the collections we hold in trust for the future. This material is the reason that the
public visit our sites, and why we do what we do.
Perhaps the most important job for us is to ensure that our museums, railways and heritage
sites remain important and in demand by that public because it may be that the greatest risk
we face in future is that what we do becomes irrelevant to the public at large. We all know the
competition we face for people's time – longer working hours, less money, TV, internet,
Twitter, shopping, sport – the list is endless. For now people still seem to want to come and
visit us but we can't take this for granted. Maybe this is something we can debate further at the
end of the day, but for now, I return to Douglas Adams and hope that the list of potential risks
I've highlighted has not led you to panic too much.
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