Major projects expose public sector organisations to significant risks

12 June 2003.

Local authorities are exposing themselves to significant, potentially catastrophic risks, through their handling of major projects or initiatives with budgets of tens or even hundreds of millions of pounds.  This warning has been issued by Zurich Municipal Management Services in an address to delegates at the Chartered Institute of Public Finance and Accountancy (CIPFA) conference.

This pressure could cause reputations to be damaged, resulting in a loss of public confidence. Projects could face short or long term problems, or even fail.

Through its work, Zurich Municipal Management Services has identified a number of key issues that affect projects in local authorities and other public sector organisations, including:

• Capacity issues, with an increasing number of projects and initiatives often requiring management by a dwindling number of staff with the · Capacity issues, with an increasing number of projects and initiatives often requiring management by a dwindling number of staff with the necessary project management skills – leading to overload and a lack of attention to detail

• Holes in the business case, for example a leisure contract where the public sector partner allowed private sector contractors to proceed on the basis of unrealistic estimates of demand

• Stakeholder buy-in, for example a road scheme where a challenge from a third party had a high risk of success, yet the whole organisation’s wider plans relied heavily on the road scheme going ahead

• Political risks, for example a number of projects where political leaders have either over promised before funding has been secured, or where the plug has been pulled after significant expenditure has already been committed

Tilden Watson, Principal Consultant at Zurich Municipal Management Services, said "We estimate that 75% of local authorities are engaged in major projects or initiatives where the strategic risks associated with the project would have critical or catastrophic consequences if they are not managed properly.  Yet a combination of ‘initiative overload’ and a shortage of staff with the necessary project management skills is leaving authorities exposed to these very risks."

"Few individual local authority projects are as high profile on the national stage as the Scottish Parliament building or the Channel Tunnel.  However, each one has the capacity to do significant damage to the authority on a local level, and taken together, the projects being managed by local authorities involve more public funds than any of the national projects that have attracted high profile criticism."
 
"If the risks associated with these multi-million pound projects are not recognised and tackled at a strategic level within public service providers, a wide range of important and high profile projects could come crashing down like a house of cards – further damaging the reputation of the public sector for managing major projects."

"Staff in the public sector do not lack the skills and experience to manage these projects.  There are simply not enough staff with the appropriate skills, and all too often the senior, strategic level decision makers are not properly heeding the warnings they are being given."

-Ends-

Notes to Editors:

• Zurich Municipal Management Services is the strategic management consultancy arm of Zurich Municipal and Zurich Financial Services Group.  It provides specific management solutions for those leading the public services, based on practical experience.  Zurich Municipal Management Services’ solutions cover corporate governance arrangements, strategic planning, business risk management, service delivery, strategic partnerships, e-government and self-assessment.
• Zurich Municipal is the leading provider of risk management and insurance solutions to Britain's public services.  The company employs nearly 600 staff dedicated to providing expert advice and support to public service providers.  For further information visit www.zurichmunicipal.com
• Zurich Municipal is the leading provider of risk management and insurance solutions to Britain's public services.  The company employs nearly 600 staff dedicated to providing expert advice and support to public service providers.  For further information visit www.zurichmunicipal.com
• Zurich Municipal reached its 10th anniversary in March 2003 - a month that also marked the 100th anniversary of Zurich Municipal's predecessor organisation - Municipal Mutual Insurance.
• Zurich Municipal is part of Zurich Financial Services, an insurance-based financial services provider with an international network that focuses its activities on its key markets of North America, the United Kingdom and Continental Europe. Founded in 1872, Zurich is headquartered in Zurich, Switzerland. It has offices in approximately 60 countries and employs about 68,000 people.
  

For further information please contact:
Pritie Billimoria, Helen Cherns, Catherine Webster or Robert Blevin. 
Tel: (0)20 7535 9950