The government's agenda to cut spending and reform services poses risk management challenges

The Big Society is David Cameron’s big idea and it’s one that he has often drawn flak for.

The prime minister trailed the concept during the general election when the idea went down with voters like the proverbial lead balloon. Undeterred, Cameron has continued to push his vision of a reformed Britain in which the state does less and ordinary people do more to deliver services in their local communities.

The implications, which dovetail neatly with the government’s commitment to reduce public spending, are huge.

For a start, public bodies face a complete rethink about the size and scope of their future activities, all of which creates huge new risks.

Zurich Municipal, which has the market in insuring public bodies cornered, tried to shed light on what this means for how they manage these risks earlier this week with the publication of a new report, entitled ‘Tough choices: different perspectives on the long-term risks facing the public sector and wider civil society’.

The study was launched on Monday at an event in Central Hall, Westminster, just around the corner from the Houses of Parliament.

Too short-termist

“People are still struggling with the Big Society,” said Zurich Municipal managing director Rob Allison.

Ipsos MORI chief executive Ben Page, whose firm’s polling underpinned the report’s findings, pointed out that public authorities don’t have much time to adjust to the harsh new climate.

“Some councils, having to set their budgets, have only just heard what the pot might be. If you are going to fundamentally recast activity, you don’t have much time to do it.”

His firm’s polling shows that 64% of public sector leaders believe that short-term budget challenges will prevent them from addressing longer term risks effectively.

A short time-scale would pose particular challenges for smaller organisations, like many rural district councils, Page warned.

“In some places, local government lacks the capacity to do this level of change quickly enough. Some local authorities lack the capacity to make the right choices. Ultimately they will fail,” the polling expert said.

What does this mean for the industry?

From an insurance perspective, the danger is that public bodies will make quick and easy cuts rather than looking at what will create risks in the long term, such as by failing to repair pavements and roads.

Chief executive of the Association of Local Authority Risk Managers Lynne Drennan raised the prospect that the cuts could include public bodies’ risk management functions.

Zurich head of public services Andrew Jepp predicted that whole organisations, like housing associations and hospital trusts, might even go belly up.

Pressure on charity

Page also highlighted concerns about an increased reliance on partners to deliver services. Such fears are especially pertinent in the light of this week’s failure of contractor-come-claims management outfit Rok, which was carrying out building projects for councils across the country.

“Councils will have to make sure that they are doing the right deal at the right time,” he said.

Such issues will be even more acute when dealing with charities, which Cameron is especially keen to see deliver more services.

“If you are going to rely more on volunteers, what happens if they don’t turn up?” wondered Page, who added that charities were often prepared to take a lower level of risk than public bodies.

The whole job was likely to be complicated by the fact that Ipsos Mori’s polling shows that the public hasn’t really woken up to the scale of the cuts yet, he added. “This will put real pressure on leadership skills across the public sector.”

No opting out

This uncertain environment meant, said Jepp, that risk management needs to become part of the core skill set for those running public agencies. His colleague Allison said that many public bodies continued to see risk management as an ‘optional issue’

“Risk is a strategic issue, it’s not just about making sure that health and safety and risk assessment forms are filled out on time,” he said.

But Jepp said there was an upside for organisations if they got it right.

He said: “Understanding risk better should enable organisations to take greater risks.”