How Government can improve decision making through Enterprise Risk Management
THE public trust in government continues to be at low levels, as a result of challenges and risks caused by Covid-19 and other factors. This perception is mainly shaped in part from stories about how performance in government agencies could have improved if leaders had taken the time to foresee and mitigate potential risks. How government manages risk has never been more important in helping meet its objectives, improve service delivery, achieve value for money and reduce unwelcome surprises such as Covid-19.
Government does recognize the need to address risks effectively and while historically it has tended to focus on risk management in the financial sphere, the Ministry of Finance recently introduced a major reassessment of government’s approach to risk management through a framework for the Public Sector that will help and guide the development and implementation of risk and business continuity practices. This framework will encourage the use of Enterprise Risk Management (ERM) in all ministries and government agencies.
There are several compelling reasons for government to adopt ERM widely to assess and address risks because the framework will inform government decisions and enable a more effective use of precious resources; enhance strategic and business planning and strengthen contingency planning.
However, policies don’t readily translate into action and none of this will be possible without a supportive risk culture at the top of government. A positive risk culture, one which encourages openness and discusses real business issues in a realistic manner, is essential to the effective management of risk. Everyone from the top down in government has a clear role to play in establishing and maintaining that risk culture.
Over the past few years many organisations especially in the private sector have embraced the business paradigm of enterprise risk management to help their senior leadership teams to obtain a top-down holistic view of the various risks from all across the enterprise that might impact its strategic success. Effective use of risk management strategies can help strengthen decision making and improve information flow. Decisions, whether to undertake a new initiative or to continue ongoing activities, involve risk and rewards. Without interrogating an organization or government’s ability to carry out such an initiative, decisions made may prove futile going forward. The world is forever evolving in ways that make sound decision making ever more difficult.
The quality of government decision making improves because effective risk management creates an institutionalized process for encouraging the flow of information across the organization and up the hierarchy to the relevant decision makers. Therefore an institutionalized process serves as a buffer against the unpopularity that sometimes plagues an individual who warns about possibilities of failure when leadership is charging ahead.
The case of novel coronavirus provides a catastrophic lesson on how critical it is for government and business leaders to come together to share information about the different kinds of risks being triggered by this single root event. The virus has created a number of different, but interrelated risks spread across most organisations. No single risk associated with the Covid-19 pandemic crisis can be managed in isolation given there is interconnected aspects to these risks and how organisations can address them. To make progress, government and the business community have to find a way to rapidly obtain a top-down, more holistic view of the risks triggered by Covid-19 from a bigger picture, enterprise-wide perspective so that they can determine which risks need to be managed first as they address the rapidly evolving crisis.
Right now, government and many entities are engaged in enterprise risk management processes without realizing it as they navigate the Covid-19 crisis. They have brought individuals from across organisations and government departments together to think about how emerging risks are impacting all aspects of their businesses and how they can close gaps or holes in that process to enable them survive the crisis. This same process of testing systems to understand their reliability and thinking about the “what ifs” to various scenarios