RiskTech Forum

Government May Lose Big Without Risk Management Solutions

Posted: 26 October 2012  |  Author: Joe Crampton  |  Source: BPS Resolver


Commercial businesses aren't the only organizations that need to carefully assess risks and threats. Working on even tighter budgets while in a volatile economic period, government agencies have also placed a higher priority on risk management.

In particular, many government organizations are looking to adopt enterprise risk management in an effort to be more proactive when it comes to mitigating dynamic threats such as economic meltdowns and health scares. Through ERM, agencies are better prepared to not just manage the consequences of risk, but anticipate them as well.

Moreover, ERM encourages organization-wide visibility, an area that many governments have traditionally struggled with due to the siloed nature of various programs and departments.

"ERM practices provide government agency leaders with visibility into their organization’s entire portfolio of programs," the World Risk Day blog notes. "This practice not only improves transparency across departments, but also helps break down silos between each program – greatly improving proactive communication about risks and the sharing of best practices."

Overall, ERM enables federal agencies to improve their decision-making abilities. Whether it's budget management, crisis response, inter-department communication or any other issue, ERM is generally perceived as the way to go.

The Impact of Flawed Risk Analysis
Government agencies have seen the effect that holes in their risk management programs can have on their stability. The global economic recession was largely due to unforeseen risks pertaining to the housing market. Still, many federal organizations continue to struggle with the management of threats.

For example, earlier this year, the United Kingdom government lost upward of £40 million and had to delay rail contracts because it didn't assess risks properly. The Department for Transport (DFT) didn't calculate inflation during the bidding process, and as a result needs to start the bidding process anew. The whole debacle delayed the production of the rail system and wasted billions of pounds.

"These flaws stem from the way the level of risk in the bids was evaluated. Mistakes were made in the way in which inflation and passenger numbers were taken into account, and how much money bidders were then asked to guarantee as a result," the DFT statement said, as quoted by Risk Management Professional. "The department cannot be confident that these flaws would not have changed the outcome of the competition or that any of the four bidders would not have chosen to submit different offers."

Government agencies are facing more risks than ever before and need to continue to be vigilant. It's critical they use risk management solutions to mitigate these threats.