Local authorities feel they lack the expertise needed to manage the risk implications of the major change programmes required by current budget cuts, according to new research from Zurich Municipal.
A survey of senior managers within local authorities undertaken at the recent Chartered Institute of Public Finance and Accountancy (CIPFA) annual conference showed that: potential failure to maintain service delivery (23%), loss of good staff (21%) and a drop in morale (21%) top the list of feared downsizing risks. Despite acknowledging the significant organisational, financial and reputational implications of the budget cuts, three quarters of local authorities (74%) still do not feel they have the relevant expertise required to successfully manage the fall-out.
The research coincides with the launch of a new report from Zurich Municipal, Building Resilience, which warns that local authorities are failing to keep pace with the changing nature of risk within the new era of ‘more for less’ government – an era that is creating many and varied risks, from those related to downsizing or increased outsourcing, to data protection risks. The changing risk landscape associated with climate change and the threat of reputational damage, heightened by the modern media environment, only adds to the challenge.
The report highlights an urgent need for authorities to professionalise their approach to risk management by adopting the new techniques emerging in the private sector. It defines a new, integrated approach to risk management, ‘resilience’, which brings together the various risk practices to focus on an organisation’s critical strategic objectives, assets and challenges. According to the insurer, relying solely on superficial risk readiness and failing to build true resilience into the organisation could see local authorities paying more – reputationally and financially – in the long term.
Andrew Jepp, head of local government at Zurich Municipal, said: “The new responsibilities and pressures now faced by local authorities have combined to create an unprecedented level of risk that many rightly fear, but few are prepared for.
“Having suffered first hand the consequences of widespread risk complacency, private sector organisations are now developing best practice risk management that could – and should – be appropriated by local authorities.
“It is no longer enough to be ready for risk – organisations now need an in-built and ongoing risk programme that focuses on resilience. That means having an appreciation of the ‘whole risk’ – the entire risk spectrum – faced by an authority, as well as the total cost of those risks, from the tangible to the intangible. Without this strategically-driven, integrated, whole-risk approach, local authorities are in danger of fatally undermining the very efficiencies they seek.”
Statistical information
- Qualitative research undertaken amongst 48 senior local authority finance managers at the CIPFA annual conference between 8th and 10th June 2010.
- “Building Resilience: developing a whole risk approach to risk management.” An exclusive guidance paper written and commissioned by Zurich Municipal. Executive summaries and full copies of the report an be downloaded from www.newworldofrisk.co.uk
