Edinburgh 12th March 2009 CIPFA Better Governance Forum Dr David Hancock MBA Public Sector Risk Manager of the Year 2008/09

What is meant by a Risk? “ The uncertainty of outcome, whether positive or negative threat, of actions and events. It is the combination of likelihood and impact, including perceived importance.” (HM Treasury, The Orange Book, 2004) A statistical inevitability?

Scoring and Traffic Light Notation L I K 5 E L I 4 H O O 3 D 2 1 1 2 3 4 5 SEVERITY LDA Legal Impact 1 Improvement notice 2 Prohibition notice. 3 Prosecution with fine. 4 Directors charged with Corporate killing, fraud etc.. 5 Directors charged with Corporate killing, fraud etc.. LDA Reputation Impact 1 No press coverage 2 Minor, local reputation damage. 3 Major, local reputation damage. 4 National adverse media coverage. 5 International adverse media coverage Financial 1 £ thousands 2 £ tens of 3 £ hundreds of 4 £ Millions 5 £ tens of millions thousands thousands Descriptor 1 Improbable 2 Unlikely 3 Less likely than not 4 Likely 5 Probable Likelihood Descriptor 1 Minor 2 Moderate 3 Significant 4 Substantial 5 Catastrophic Impact LDA Output Targets 1 Exactly meets targets 2 Significantly meets targets 3 Meets 50% of targets 4 partially meets targets 5 Does not meet targets Health & Safety 1 Negligible injuries 2 Minor injuries 3 Major injuries 4 Single fatality 5 Multiple fatalities Schedule 1 Day 2 Week 3 Month 4 Year 5 Years

The Risk Process Set Objectives Monitor the risks Report movement of the risk Identify Threats and Opportunities to Objectives Assess the risks associated with each threat and opportunity ( Inherent ) and map exposure (PxC) Consider actions to manage risk terminate, tolerate, treat, transfer Reassess the risk ( Residual ) and remap (PxC) in light of actions in place

Response to risk… the 4 Ts Terminate – Do things differently and thus remove the risk Tolerate – Nothing can be done at a reasonable cost to mitigate the risk or the likelihood and impact are at a reasonable level Treat – Take action to control the risk either by reducing the likelihood of the risk developing or limiting the impact it will have on the project Transfer – Some of the financial risk may be transferable via insurance or contractual arrangements or accepted by third parties

The performance management framework has moved to a process of negotiation which is changing the relationship and the dynamic between central and local government. Central government has responded by attempting to adopt a more citizen-focussed and community-centred approach to public policy. ‘ Challenging perspectives’ - NLGN What are the Particular Challenges

What are the Particular Challenges National performance framework

Public Goods, Public Choice, Public Value

Risk and Opportunity

Understanding what is meant by success is crucial

Problem Solving Problem Solution Time since beginning Gather Data Analyse Data Formulate Solution Implement Solution “ TAME” Problems can be solved by linear or “waterfall” process

“ MESSES” meet the following criteria: Organisational Complexity - clusters of interrelated or interdependent problems, or systems of problems. Messes are puzzles; rather than solving them we resolve their complexities. Cannot be solved in relative isolation from one another .

“ WICKED PROBLEMS ” are characterised by: An evolving set of interlocking issues and constraints - no definitive statement of the problem (no understanding of the problem until the solution has been developed). Many stakeholders - the problem solving process is fundamentally social (getting the right answer is not as important as having stakeholders accept the solution). The constraints (resources, politics) change with time - stakeholders come and go, change their minds or change the rules. Since there is no definitive Problem there is no definitive Solution .

“ WICKED” Problems cannot be solved by linear or “waterfall” process Problem Solution Time since beginning

Wicked Problem Solving Resolving “ WICKED MESSES ” is “ SATISFICING ” (H. Simon 1956) Because of the number of stakeholders, changing constraints and dynamics of the problem, there is no ideal solution-it is “as good as it gets” or “good enough” The Problem solving process ends when resource (time, money energy etc.) runs out! Therefore we need a different approach when handling risk with respect to problems which are not Tame

Wickedness in Government “ The so-called ‘ wicked issues ’ facing government, such as climate change or worklessness and obesity, do not fit neatly into any single government department”. “ Such long term challenges require partnerships between multiple local agencies and actors, as well as a new attitude from the centre”.

Boston Matrix Behavioural Complexity High Low Wicked Wicked Mess Tame Mess Dynamic Systems Complexity High Low Resolution is social/ political/ ethical/ moral/ behavioural Solution is Scientific

Risk Management

What does a successful joint audit and risk management programme look like?

The need for holistic thinking I’m glad the hole isn’t in our end!

Corporate Risk Register

CRR and Audit Plan

PUBLIC AUDIT COMMITTEE CALLS FOR IMPROVED MANAGEMENT OF MAJOR CAPITAL PROJECTS The committee has called on the Scottish Government to ensure that more projects are subject to formal review procedures to ensure that they remain on track and are properly managed. In addition, the committee has asked the Scottish Government to consider how it can make information on the progress of projects more readily available to the public.

OGC Gateways and Risk

Different categories of risk? Operational/ Factors that may effect meeting the short term Technical objectives of the team Financial/ Legal/ Factors that may effect the efficient use and C ontractual accountability of funding and the impact of constraints on funding factors that may effect the delivery of statutory/regulatory responsibilities Behavioural/ Cultural and behavioural factors that may effect the Cultural/ performance of the team Organisational Strategic Factors that may effect meeting the medium to long term objectives of the team

Any Questions? “ When all you have is a hammer, everything looks like a nail”. Japanese Proverb

Performance Reporting [including risk]