Managing Risks in Public Organisations
by Martin Fone & Peter C Young
Perpetuity Press 2005
Risk and Crisis Management in the Public Sector
by Lynn T Drennan and Alan McConnell
Routledge 2007
The pace of change in the concept of what risk management is and does shows little sign of slowing, and even within the brief period of time since these books went to press it can be argued that the distinction between public and private sector – from the risk manager's viewpoint – has become less obvious. The pressure for increased corporate responsibility in the private sector and increased transparency in the public sector is arguably leading towards the realisation that the ultimate stakeholders in both sectors, if not precisely identical groups of people, are likely to share many of the same concerns and require the same assurances that risk is being properly managed.
Nevertheless, as Fone and Young argue, there are such things as public risks – those which cannot be distributed, which cannot be captured in market pricing, which are created by the political process, which raise concerns about the protection of individual rights, or those where the exposure is public. While we are seeing battles around the fringes as government seeks to 'privatise' risk in areas such as pollution, treatment of road accident victims, and waste disposal, there will still remain large swathes of everyone's life where government will ultimately be responsible for managing the uncertainties of life and their after-effects. Indeed, as Fone and Young state, the management of public risks is a fundamental role of government.
These are two very different books, although the authors acknowledge one another's work. Fone and Young give a detailed overview of the public sector risk environment in the UK, with a careful mix of the academic and the practical. This balance makes it useful both to those who are studying the whole subject, and especially perhaps to risk managers who may be contemplating a transfer from private to public sector. Drennan and McConnell's book is part of Routledge's 'Masters in Public Management' series, which is 'intended to form the backbone of the holistic study of the theory and practice of public management for university courses, work-based training or self-guided study'. It is therefore laid out with learning objectives, key points of chapters, and (excellent) suggestions for further reading. This is not to detract from the practical value of the book, which is heavily focused on strategies for managing risk and especially for successful crisis management. Much of what Drennan and McConnell have to say in these areas can apply equally to the private sector.
Where Fone and Young's book is particularly strong is in its analysis of the environment within which the public sector risk manager has to work. The authors identify seven sources of risk: physical, social, political, legal, economic, operational and cognitive and look in detail at four of them. In doing so, they do not neglect history – as so many risk management books are inclined to do – but show how risk financing and management in the public sector has evolved from its Victorian beginnings to the present situation. There are enlightening considerations to be had here – for example the insight that the relative invulnerability of all those stone-built civic institutions in the face of disproportionate insurance premiums led to the establishment of mutuals – and how, in turn, that model became vulnerable.
In fact, Fone and Young identify the economic and legal environments as being probably the most challenging for public sector administrators. Their description of the disastrous Hammersmith interest rate swaps of the early eighties, whereby a local authority sought to circumvent caps on its spending by trading high-risk derivatives, is held up as an example of a fundamental failure to understand the relevant risks. The sub-text here is that the eternal battle for resources between local and central governments makes for risky behaviour and creates an (unnecessary?) realm of hazard.
For me, the most interesting and valuable section of Drennan and McConnell's book is their chapter entitled 'After the Crisis'. As they say, 'it is the most understudied of all the phases of crisis management'. Here, although the case studies and the thinking are drawn from public sector experience, there is much that is applicable to the private sector too. The authors carefully examine how post-crisis inquiries are double-edged swords, capable of covering up deficiencies, passing the buck, and blunting the learning experience, while nonetheless maintaining that they are seeking to reveal the truth. There is also the insight (again in a political context, but far from irrelevant to the private sector) that the aftermath of a crisis provides ideal opportunities for jockeying and skulduggery among ambitious players – again to the detraction of the general good.
In summary, both these books are stuffed with intelligent perceptions which resonate well beyond the realm of public sector risk management, and both provide food for thought for the risk manager. Drennan and McConnell's book suffers a little from what I term insecure editing, notably in unnecessarily quarantining colloquialisms within quotation marks and being uncertain about the function of commas, but not sufficiently to irritate to excess.
