Magazine article Public Finance

Crash Course

Magazine article Public Finance

Crash Course

Article excerpt

While this week's emergency Budget included little to hearten local authorities, it does at least put some end to the speculation about the extent of cuts in local government.

Now is the time for councils to start implementing the largescale change programmes that all will need to undertake. Some organisations will already have some of these changes in train, while others might be starting from scratch.

What we know for sure is that few have the necessary risk management practices and processes in place, leaving them potentially vulnerable to the operational, reputational and financial fallout that will inevitably strike in the months and years to come.

So what could, and should, local authorities be doing to ready their organisations for this unprecedented programme of cuts and downsizing?

The answer is, perhaps, an unexpected one: learn from the commercial sector.

The financial crash that largely precipitated the cuts in this week's Budget exposed the simultaneous complacency and risk-taking of some private sector organisations. But it also provided some salutary lessons in risk management that the public sector could take heed of.

The collapse of global markets showed the majority of corporations to be hugely exposed and underprepared for the crisis. Many risks were poorly anticipated, some were flatly unexpected. Crucially, risk management itself was not a major priority at a time when risks were becoming increasingly complex, diverse and interconnected.

Today, however, the commercial sector is developing a multi-dimensional approach to managing risk. This uses disciplines such as enterprise risk management - leading from the top - and business continuity management, carrying on in emergencies. IT disaster recovery is á good example. The result is an integrated risk framework of true business 'resilience', which allows organisations to plan for. react to and recover from risks.

This shift from reaction to readiness is the kind of proactive approach that local authorities need to be taking today. They must prepare for the increasingly wide-ranging risks they already face, which will be intensified by the fundamental changes they are about to embark upon - from redundancies to new outsourcing models.

To a certain extent, councils are already taking the first steps on this journey towards resilience. …

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