public sector

Managing risk in the public sector has unique challenges: public departments and agencies have operational risk challenges, like any entity; but the state is a risk concentrator. That has direct implications for how risk is understood and approached analytically.

CORPORATE SECTORS

PUBLIC SECTOR

Understanding risk is critical to effective policy formulation: the purpose of the state is to concentrate risk by moving it away from individuals, households and communities. This alone makes a rigorous approach to understanding risk, its incidence and management essential to effective state action.

In recent years, there has been an enormous growth in the focus on risk as hazard, on regulation to reduce hazards or threat of harm to individuals. But the process of policy objective specification, formulation and implementation involves risk – in the sense of uncertainty, ambiguity and complexity – at every turn, regardless of the subject matter; it is these risks that are, for the most part, chronically under-managed. The result is waste.

With the focus of government switching to cost reduction and elimination of waste, improving risk management in the policy process at all phases is a vital imperative. Also, with the need to eliminate up to 25% of some departmental budgets, more radical (the Conservative mot de jour) approaches to policy are needed. This creates three related problems: (i) breaking out of the incrementalism that dominates policy specification and formulation and the risk that goes with bolder policy strokes, (ii) improving dramatically the management of delivery and implementation risk, and (iii) managing risks associated with the changes that are required in agencies to reduce cost and eliminate waste.

Put simply, the old (actually, the current) approaches to risk management commonly deployed are no more effective in the public sector than in other settings where increasingly evidence suggests chronic failure. The financial crisis is a wake-up call for risk management of all types at all levels – the comfortable assumptions of the day-to-day management of risk in government agencies must be challenged and discarded if ineffective. The time has come for a paradigm shift in managing risk in government at all levels.

KEY ADVISORY FOCUS

Public policy risk

Public policy agencies need to expand their focus beyond risks of harm to uncertainty and its role in the process of policy design.

KEY ADVISORY FOCUS

Public agency risk

The way public sector agencies have been managing risk is neither effective nor contributory. Agencies need new risk tools.

KEY ADVISORY FOCUS

Managing public sector change risks

The level of change required in the public sector is unprecedented. Both policy and delivery agencies need to manage change risks carefully.