Australia's National Local Government Newspaper Online

Risky management

The UK Experience by Malcolm Morley *

Risk management is increasingly becoming an issue for Councils as they look towards partnership working with the private sector, face increased public expectations, limited finance and come under pressure to continuously improve their performance. This has been recognised by the Audit Commission which has extended its focus of attention from an evaluation of financial risks to a broader evaluation of risk.

A Council’s Risk Management Strategy needs to cover;

• risks to the Council’s reputation through inadequate performance
• financial risk now and through the forward commitment of resources
• access to/and exploitation of innovation
• technology/system obsolescence
• lack of control over income generation;
• the interfaces between politics, the Council’s strategic focus, organisational capability and operational competence
• partnership working and contractors
• fragmentation of service delivery
• the creation of aggregated risk and risk momentum over time
• the ability to respond effectively to legislative changes and political changes at a local level.

UK Councils have not traditionally had risk management strategies and indeed have not fully appreciated the risks that they run. Consequently they often need external help to enable them to develop effective risk management strategies.

In seeking this help, it is vital that Councils develop clear specifications for what they want. Councils must resist the temptation for a consultant to merely write the strategy. They must be actively involved in the process to ensure that it develops the capacity to develop/manage the strategy produced on an ongoing basis.

A key outcome from the development of any Risk Management Strategy must be the development of this capacity. The following questions will help with this approach. How will the consultant’s approach enable the Council to;

• develop objectives for risk management?
• define and identify key risks?
• identify the causes of those key risks?
• weight the key risks in terms of the probability of their occurrence and their impact on the Council?
• prioritise risks for action?
• develop and evaluate options for preventing and mitigating the key risks identified?
• identify the implications of the key risks for the Council?
• identify the costs associated with seeking to prevent and/or reduce the risks identified for priority action?
• develop risk management competencies and systems within the Council?
• develop risk management as part of its organisational culture?
• identify and manage the aggregation of risk over time?
• reduce the risk profile of the Council?
• review its performance in reducing the risk profile of the Council?
• develop the capacity to develop/manage the Risk Management Strategy on an ongoing basis?

Consultants should be asked to identify the timescales and costs for each stage in the development of the Risk Management Strategy and for the CVs of the staff that would be carrying out the work. Don’t be caught by the slick presenter sent to get the business and the office junior sent to do the work! Always ask for examples of work undertaken for other Councils and a list of clients who are prepared to be contacted about the development of risk management strategies by the firm.

Risk management is one of those issues that is ignored until a crisis occurs. This can only be described as risky management.

*Malcolm Morley is Chief Executive of Harlow District Council and can be contacted via the Editor, email info@lgfocus.com.au The views expressed in this article are not necessarily those of his employer.

The following articles are also included in this edition or go BACK to the main page: