Internationally, Australian local governments are among the most sophisticated and prevalent with respect to Enterprise Risk Management (ERM) implementation. By way of example, out of 103 Canadian local government websites examined 15 have an ERM policy. In the United States, out of over 200 websites examined only 7 has some aspect of ERM. In Australia, of 140 websites examined 71 had an ERM policy.
Given the number of local governments in Australia implementing ERM, a 2018 Risk survey of 100 Australian local governments by ANNON Risk Solutions, provides insight about the risk’s Australian local governments face and how well they are responding. This article discusses the results of the survey.
Key Findings
Local government in Australia have the same challenges as their peers worldwide. Councils must juggle the construction of new roads and bridges to accommodate growth, with the need to maintain existing infrastructure. Tax payers expect more and better-quality services but are resistant to pay for them. The mantra to government is: Do More with Less. Consequently, one of the key findings of the survey is that government officials can easily identify and rank the risks they face. But, are not able to identify and apply best practices which promise greater protection from their adverse impact. Only 23% of the councils have a comprehensive risk assessment conducted regularly. Larger councils are more likely to conduct such an analysis. Small and rural councils are more likely to let it slide. This is constant with a study of ERM implementation in Finish local governments.
Below are the top risks facing Australian local governments. They are like those identified by local government officials in Canada and the United Kingdom.
- Infrastructure
- Financial sustainability and stability
- Health & Safety
- Cyber
- Reputation
- Human Resources
- Asset Protection
- Funding
- Planning Decisions
The description of several risks shows their universality.
Financial
Respondents noted ratepayers expect more and better services, but they do not want to pay for them. The “mantra “Do More with Less” is creating stress on staff. This in turn affects employee wellbeing.
Health and Safety
Documented health and safety processes are well established and wide spread, but smaller regional and rural councils are having trouble keeping up with and implementing Health and Safety best practice. This is due to a lack of fiscal and human resources. Consequently, they are missing out on their synergistic effects. Safer work places reduce accidents and claims. This in turn reduces premiums. Which in turn, reduce expenditures for Health and Safety.
Reputation
Governments are having a problem managing and moderating the behavior and decisions of employees and elected officials. Social media makes governments porous with information leaks. The uncertainty created by the continual and intense scrutiny is causing Council and Officer insurance premiums to rise.
Human Resources
Attracting the right people and retaining talent is a problem. Employee engagement remains a major issue with local government. Further, different generations have different ways of working and communicating. Councils are having trouble adjusting.
Cyber Attacks
In the first six months of 2017, the Australian Signals Directorate responded to 671 serious cyber-attacks involving some level of government. Pending legislation will require councils to report and remediate any serious breach of private information whether from hacking or by accident. Councils holding the private data of Europeans – temporary works, etc. are required by the European Union Regulations to report and remediate breaches within 72 hours.
There can be no doubt that the risks are multiple. They can come from many directions. Further, their impact is not limited a program or department. They cut across organizational silos. Managing the adverse impact of these risks requires an enterprise wide approach.
In addition, the risks are universal. Financial uncertainty and what might be called the “Amazon Era” where people have high expectations, demand fast service, transparency and effective use of resources, creates difficulty for governments worldwide. Retention and recruitment as baby boomers retire and the differences in the way different generations relate to work is knows no geographic limitations. The interconnected digital environment with 24-hour news cycle places governments under intense scrutiny.
To deal with their risk rich environment, local governments in Australia have begun to implement ERM. They are among the world leaders in ERM implementation. ERM provides them with a methodology for identifying and prioritizing risks in an efficient manner. This in turn allows them to identify and apply mitigative efforts in the most effective manner.
Conclusion
Good governance and risk are intertwined. The risks government’s face is increasing. Australian local government clearly recognize this. They have no trouble identifying and prioritizing the risks. In the past it was easier to ignore risk. In the Amazon era where the mantra is: Do More with Less, and the twenty-four-hour news cycle, risk cannot be ignored. The damage caused by natural disasters or the remediation costs a of a cyber-attack added expenditures councils have probably not budgeted. The immediacy of these type of expenditures diverts resources away from daily operational needs and impedes the accomplishment of strategic goals.
Recognizing the risk challenge, local governments in Australia have implemented ERM. They are using its methodology to identify, prioritize and mitigate the risks they face. They are taking proactive measures to manage risk, protect resources and reduce costs. As such they are using good governance.
Bio:
James J. Kline is a Senior Member of ASQ, a Six Sigma Green Belt, a Manager of Quality/Organizational Excellence and a Certified Enterprise Risk Manager. He has work for federal, state and local government. He has over ten year’s supervisory and managerial experience in both the public and private sector. He has consulted on economic, quality and workforce development issues for state and local governments. He has authored numerous articles on quality in government and risk analysis. jeffreyk12011@live.com