Risk Management: A Primer for Finance Officers and Public Managers

By Greifer, Nicholas | Government Finance Review, June 2001 | Go to article overview

Risk Management: A Primer for Finance Officers and Public Managers


Greifer, Nicholas, Government Finance Review


This article provides an overview of modern risk management as practiced in the public sector.

Risk is a fact of life and a fact of government. To accomplish any major public policy goal and any financial goal-building a new municipal stadium or funding a retirement plan, for instance-requires taking on risk. Moreover, the government's Chief Financial Officer (CFO) often is called upon to understand, manage, and mitigate the risks associated with government projects.

Understanding Risk Management

Finance directors and other staff in the finance department must have an awareness of the evolving field of risk management, if for no other reason than to understand the "shocks" that can occur to the government's budget when unforeseen events threaten to disrupt the plans envisioned in the annual budget. Moreover, three factors make an understanding of risk management vital to the exercise of the OFO role.

First, finance departments are often the locus of the risk management function. In fact, the most common place to house risk management activities is within the finance department--it is more common than legal, human resource, or stand-alone risk management departments.

Second, risk management in some ways is bucking the trend of privarization. Risk management is being brought back in-house through the hiring of full-time risk management specialists. Ironically, the traditional model of risk management was to outsource nearly all risk management activities to an insurance company. Nowadays, many governments (particularly larger governments) believe it is more cost effective to take on the financial cost of risk directly. This is often referred to as self insurance or risk retention, in which, for example, a government would pay out-of pocket the cost of an incident under a certain dollar threshold (larger catastrophic losses would still be shifted to either an insurance company or "risk pool").

Third, and most familiarly, governments have gone through a litigation revolution that has seen the erosion of long-standing tort immunity. The notion of sovereign immunity has clearly been scaled back in the last 20 years or so as governments have been successfully sued for damages in a number of areas. A number of these areas are prominent in the news media, such as incidents where policing techniques have been challenged. For example, high-speed police chases, racial profiling, and the use of excessive force have all been areas of legal dispute.

Of course, policing is not the only area of risk to state and local governments. Technology has created a new source of risk for local governments. As noted in GFOA's An Elected Official's Guide to Risk Management, information technology (IT) has altered the risk profile of a government. IT liabilities that risk professionals must attend to include:

* e-mail--It is necessary for managers to emphasize the importance of maintaining communication standards. The same standards that apply to other official correspondence (e.g., letters and faxes) should apply to e-mail. Because of "open records" laws, employees should be reminded not to write in e-mails anything that they would not want posted on a bulletin board.

* privacy--Public-sector use of technology to maintain citizen and employee records has the potential to improve efficiency and streamline operations. However, a failure to maintain sufficient levels of privacy and data integrity may inadvertently create perils such as "identity theft" or harassment of persons targeted in a database, by perpetrators who gain access to the personal records of their victims. At the same time, open records laws hamper the ability to keep information confidential.

Risk Management Program

* e-Commerce--e-commerce and other types of on-line transactions are threatened by "hacker" attacks and viruses that might interrupt government operations or result in the denial of service to citizens seeking information from a government's Web site. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Risk Management: A Primer for Finance Officers and Public Managers
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.