Do councils really understand risk?

Posted on 03/05/2016 by Ed Hammond. Tags: ,

With which of these statements about risk do you agree?

“Councils are risk averse.”

“Councils are cautious and prudent.”

Give up?

Of course, this is a ludicrous question. It all comes down to how you use language around risk – how you understand it, how you tackle it, how you mitigate it. More than anything, it comes down to perspective too. The perspective of what risk is, what “risk-taking” is, and how subjective some of these issues can really be.

I am midway through writing a paper on this – a companion-piece to a similar paper produced a little earlier this year about social return on investment. It will try to unpack these tricky issues around risk for those who are holding decision-makers to account.

Because nothing is more important.

Our personal lives are defined by risk, and we are quite good at understanding and acting on them. Do I take a loan out from the bank to get a new car, even if I think there is a chance I might be made redundant in a year’s time (I should stress, this is a hypothetical example)? Do I buy two bags of rice from the supermarket instead of one even if I am pretty confident that, before I get through the first one, they’ll be back on special offer? Do I wait until the weather gets better before getting someone in to investigate the worryingly growing damp patch on the wall of the spare bedroom – or do I bother getting anyone in at all?

But our professional lives are also bound up with risk, in a way that is often much less tangible, and much more complicated. Here, risk becomes strategic – several stages removed from its final outcome, uncertain, much more difficult to predict. Risk becomes arcane. For example, the question, “what happens if we close libraries?” can be answered in many different ways.

Many councils are criticised for avoiding risk –  but I think that the real story is that some just don’t understand risk, rather than that they consciously take steps to avoid it. Risk aversion is often seen as the same thing as preserving the status quo, but with local government being as it is, trying to shore up the status quo can be a much riskier proposition than taking positive action to change things. When risk is difficult to understand, identify and quantify, it becomes difficult to bring it into the mix when big and important decisions are made. At its extreme, it either becomes highly transactional – a risk register sitting at the back of a strategy as an appendix, unreferred to and unacknowledged by anyone – or a subjective mess of political opinion. Either of these is dangerous, because understanding a risk – essentially, understanding uncertainty – makes it easier for us to understand how we can deliver the services local people expect, and how we can minimise the chance of things going wrong. Put bluntly, if we pull this lever in the Town Hall – or if we *don’t* pull it – what unexpected consequences might result, that we might not have thought of?

Councillors, then, need to understand risk better in order to scrutinise better. The more councillors sitting on a scrutiny committee have a sense of where risk lies, they can direct their intervention to those specific issues, rather than taking a scattergun approach which doesn’t engage with the reality.

This isn’t about “knowing where the bodies are buried” – using this information to attack the council’s leadership where it is most vulnerable. It is about trying to understand where the area’s biggest challenges lies, and understanding how councillors’ unique perspective, as elected representatives, can help officers to better understand the likelihood and impact of those risks, and how best to mitigate them.

As we do our research, we are keen to hear of examples of instances where overview and scrutiny has engaged intelligently with risk – where risk has been used as a hook for a piece of scrutiny work, where analysis of a risk register or a risk management strategy has led to scrutiny making productive recommendations for change, or where risk is simply something that councillors are interested in and want to know more about.

The report will be published at the end of May.

About the Author: Ed Hammond

Ed leads CfGS's work on devolution, transformation and on support to councils and other public bodies on governance and accountability.