Public Sector Risk Management in a Recession

Unless you've been living on Mars for the last year, you will have been unable to miss the fact that the global economy has gone through the largest economic downturn since World War Two. Regardless of the cause behind the downturn, the effect is that many nations are now considerably in debt and are proposing severe austerity measures in order to repay and reduce the debt burden.

The scale of the proposed measures are such that, if imposed, they are likely to have considerable impact on UK public sector bodies, forcing choices that expose them to a higher degree of risk.

If you are a risk management professional working in the public sector, this is likely to significantly pressure test the robustness and value of your organisation's risk management programme.

Cuts to the budgets of public sector organisations can be expected to bring about some of the following possibilities:

Reduction in services: The overt impact of budget cuts which may directly impact the ability to fully realise organisational aims.

Threat of job cuts: Which may impact staff morale and therefore affect performance.

Industrial action: The possibility of a rise in the number of industrial disputes and strikes taking place, the impact of which could lead to additional cost and a decline in the ability to realise organisational objectives.

Management distraction: Managers, who would normally be focused on ensuring the delivery of services, instead become distracted by the need to re-plan to determine how to meet service requirements with reduced budgets, or end up involved in reducing personnel numbers through redundancies – ultimately taking them from the requirements of their day job.

Training cost: With reduced headcounts, some roles may be combined into one, which may incur additional training costs. Above the financial cost is also the delay this could have on the individual's capability to deliver against objectives when allowing for the learning curve.

Imperative pressure: The idea that we need to rush to get more done, faster, which in turn can cause error, loss in the workplace, and even result in injury through stress or accident at work.

Supplier risk: Existing contracts with suppliers may be jeopardised if volumes are reduced, this could see shifts in the cost of contracted products or services, loss of suppliers, and increased costs incurred through having to repeat the procurement process again.

Cancellation costs: Projects and work programmes that have been initiated may need to be cancelled. This could lead to the loss of existing investment and could impact on organisational strategy. Shelving an IT project to cut costs may directly impact on the ability of another part of the organisation to deliver on planned services.

This list could go on and on, with a host of possible implications for public sector organisation, all of which translate into challenges for public sector risk management.

For risk professionals working in the UK public sector, the current economic environment and the threat of budgetary cuts threatens a greater level of uncertainty than many will have previously experienced. The likelihood that your organisation may be required to go through a time of change, and that it will be exposed to increased risk from the areas highlighted above will likely increase. You will be called upon to play a key role in ensuring the organisation mitigates impacts, and work to keep it on track.

One key factor here is making sure that the organisation understands the important role risk management can play in guiding the organisation through this period.

Risk Management Budgets: If the overall level of risk facing the organisation rises to an all time high, then reductions in the risk management budget, or risk management personnel, would not be a wise move. In order to meet its organisational objectives in the face of any or all of the above mentioned scenarios, organisations will be required to engage in more effective risk management, not reduce risk management activities. Risk professionals should be aware of the strength of their case for defending their budgets and pushing for a greater focus on risk management to meet this heightened uncertainty appropriately. Organisations that fail to heed to this message may actually increase their level of risk exposure.

Risk Management Opportunity: For risk professionals, this will be a time to prove your capability and your worth. Amidst all of this uncertainty lies the opportunity to shine, helping the organisation navigate its way through the risk implications, mitigating the impact of these risks, and maximising the organisations resilience. Doing this successfully will overtly demonstrate the real value of risk management to the organisation, and lead to greater support in the future.

Be in no doubt, this will be a very challenging time for the UK public sector, but those risk professionals that can retain focus through this period, and deliver a risk programme that successfully guides the organisation through this uncertainty, will find themselves viewed as valuable components of the organisation, and will confirm risk management as a vital organisational activity.

Just as a ship's captain would prepare his crew and batten down the hatches as the ship sailed into the storm, so too must risk managers work with organisational leaders to ensure the organisation's risk programme is comprehensive and fully embedded (with vocal leadership support). Participants from across the organisation should be reminded of the importance of good risk management, and engaging, supporting and collaborating in the organisation's risk management activities.

If you're a risk management professional in the UK public sector you may be considering how to strengthen your organisation's risk management programme. Whether it is the ability to ensure that the organisation's objectives align from top to bottom, with personnel clear on requirements at every level within the organisation; a risk management process that captures risk from across the organisation, empowering users to participate in the process and support your work; or improving your ability to capture, consolidate, and report on risk management data, we can help.

Risk Network is the UK's number 1 risk management software solution for a reason. It can help your organisation realise a step change improvement in your risk management capabilities, really empowering your risk management programme. Risk Network is in extensive use across the UK public sector and is widely seen as the next evolution in effective enterprise risk management.

If you'd like to see what Risk Network can do, and would like the chance to reflect on whether it could be suitable for your organisation, then please contact us and speak with one of our Product Managers. They'll be able to give you a detailed look inside Risk Network, allowing you to determine the level of improvement it could bring to your organisation's risk management programme.