Managing the Risks in
a Volatile Environment
John Gill, Risk and Resilience Manager,
Manchester City Council
Session Aims
•
To present a different way of thinking about risk strategy
•
Pose some challenges to orthodox thinking about risk
•
To look at what extreme austerity looks like in practice
•
To consider the implications for risk appetite
•
To present some practical case studies of what thinking
differently looks like
•
To consider implications for risk managers and auditors
•
NB: Opinions expressed are my own and I don’t have all
the answers
Which of these is most risky?
Background
• Good presentations make you
think… Whether what you think
about is what was intended is
another matter!
• CIPFA Presentation Solid, Sensible
Stuff: Good grounding in orthodoxy
• A “Road to Damascus” Moment!
Orthodoxy in Risk Management
Thinking
• Communication
• Governance
• Assurance
My Road to Damascus Moment
• The right conceptual thinking in the
wrong order!
• Tension between mainstream theory
and local experience of managing risk
in severe austerity
• Regional discrepancies in applying
budget reductions
• My organisation particularly hard hit
• The figures are startling….
The National Projection
Source: “Managing Demand: Building Future Public Services” . RSA 2014
Risk Appetites (1)
Risk averse (The Ruminant)
•
Uncomfortable with uncertainty/ambiguity
•
Seeks security and resolution
•
Practical, like facts, established ways of working
Risk neutral (The Nomad)
•
Takes current risks for high future pay offs
•
Abstract, creative, possibilities and change
•
Long-term focus
Risk Appetites (2)
Risk tolerant (The Predator)
•
Comfortable with uncertainty
•
Risk is normal
•
Laissez faire approach
Risk seeking (The Aggressor)
•
Adaptable, resourceful, likes action
•
Enjoys tackling uncertainty so casual approach to
threats
•
Will see few threats
Your Perceptions
• Very briefly…
• Talk round your table…
- Share between you what do you think
your organisations’ risk appetites are?
- Consider as a group how reasonable
it is to talk about one risk appetite?
What Austerity Looks Like
• This is not “Shroud Waving!”
• Loss of budget- reality vs risk
• Attempt to present a new reality
dispassionately
• Variable picture nationally, so my
Council as a case study
Change in Spending Power 2014/16
The map below shows the distributional impact of the 2013/15 Financial Settlement
Budget Context
Table shows 40% reduction in Directorate Budgets 2010/16
Resources Available
2010/11
£m
2011/12
£m
2012/13
£m
2013/14
£m
2014/15
£m
2015/16
£m
2016/17
£m
641.5
581.5
545.9
530.8
517.6
466.6
451.0
54.6
52.8
49.7
60.0
53.3
64.3
53.8
70.4
53.8
72.2
53.8
72.1
53.8
73.0
534.1
471.8
428.3
406.6
391.6
340.7
324.2
641.5
581.5
545.9
530.8
517.6
466.6
451.0
Calls Against
Resources:
Corporate Items
(Including contingencies
and capital financing)
Levies
Departmental Costs
Total Call against
Resources
Reduction in Directorate
Budgets
Reduction as %
-210
-40%
How the Budget is Spent
Workforce Reductions
FTE Workforce Reductions
Original workforce- circa 10,000
when schools excluded
2011/12
2012/13
2013/14
2014/15
FTE
FTE
FTE
FTE
1,681
Total
344
562
268
2,855
Meeting the Current Gap
• Need savings c£60m rising to £100m by
2015/16
• This includes income generation from
business rates and council tax
• Guided by Budget Principles and agreed
approach to finding Savings
• But, also uncertainty- demography,
levies, investment for growth etc
Meaning?
• Still not “Shroud Waving” (not least, it’s pointless)
• Welcome opportunities to do things differently
• BUT, we have moved into completely new territory
• Loss of historic evidence base, new strategies, high
risk
• High opportunity
• Fundamental change is the only option
Approach to Savings
•
•
•
•
•
Growth – how to create jobs, drive private sector investment in
business expansion and create the opportunities for commercial
development and wealth creation, alongside neighbourhoods that will
be attractive for the City’s growing population
Reform - to reduce the demand for services including how work with
partners to do this and how the use of ringfenced resource is
maximised to deliver the greatest benefit
Collaboration i.e. Sharing responsibility with Councils or public
agencies for delivery of services whilst retaining democratic control
over levels and standards of service and cutting management costs.
Efficiency to meet demand at lower cost.
Income generation taking all opportunities to generate income
consistent with priorities for the growth and support services meeting
residents' needs. Opportunities to support business growth and
increase the council tax base will be maximised.
Budget/Business Plan Principles
•
•
•
•
•
Leadership for Reform – Economic Growth, reduce worklessness
and dependency, promote private sector investment.
Targeted Services – Provide effective safeguarding and protect the
most vulnerable, support effective integration of health and social
care and integrated commissioning at neighbourhood level. Work to
reduce dependency, manage demand effectively and support
residents to be economically active.
Universal Services – ensure provision of high standard of services
for residents from education to libraries, ensure services provide
support to those most in need
Neighbourhoods – Budgets should be neighbourhood focused, with
a focus on supporting neighbourhoods with a good housing offer, that
are clean and are places where people want to live and work,
develop a community service focus.
Core – Centres of Excellence to drive reform, provide effective
support services, protect customer facing services, and maintain the
Council’s leadership role within AGMA and the Combined Authority
Implications for Risk
• An emerging picture• Answers uncertain… but
• Agilility becomes everything
• Can’t afford to be risk averse
• Principle of “do least harm”
• Manage anxieties and emotions
• Identification of performance “triggers”
Implications for Risk (Upside)
• Risk and assurance move centre stage
• Front end process, informing options
appraisal
• Absolutely key to communication,
governance and assurance
• Services want us- part of the solution
• “The old conundrum” in dealing with
uncertainty
Implications for Risk (Downside)
• Used as a stick to oppose/delay
change (Tharn)
• Risk taking without consideration of
consequence (reckless culture)
• Inconsistent appetite, changing
strategy
• Risk without reward
Some Case Studies
•
•
•
•
Recruitment and Retention
Property Management
Looked After Children
Strategic Service Delivery Models
“m people”
• Reductions in staff through voluntary
redundancy and natural wastage
• A competency framework approach
• Making the most of resources by
being swift and decisive
• Closed front door- open back door
• High risk/high reward
Corporate Landlord
• Expanded Corporate Landlord Function
- to deliver economies of scale
- to enhance efficiency of space usage
- to ensure effective management of a
reduced housing stock
Looked After Children
Early interventions before children and
families enter the formal care system
• Opportunities to bear down on dependency
• Reduce overall demand
• Reduce residential care placements
• Focus more family based care for a smaller
number of service users
• But- model’s untested in a Core City
Moving from Provider to
Commissioner of Services
• Within the scale of budget reductions… If
we can’t provide, what can we do?
• Commissioning provides a totally
different risk profile…
• A wholesale strategic change, not only to
our operational model, but also to our
purpose
• Assumptions, skills, capacity, the
emotional will, performance management
Risk Appetite and Context
Key Messages
• Austerity = uncertainty- we start
from a different premise
• Opportunities to do things differently
• And to innovate.
• But, the primary imperative is to
reduce cost, whilst protecting that
which is essential
Key Messages (2)
• Risk Management that is accepting that
what we are doing is risky… regardless
• Risk Management in options appraisal
• Risk Management in service business
planning
• Risk Management in performance
management
• Risk management to inform service
planning
Key Messages (3)
• If you don’t yet recognise the reality…
watch this space. Budget reductions are
projected for the next three years
• To be risk averse is a limited option when
planning enormous change
• All transformation modelling has to be
risk based
• We are in demand
• The opportunities are enormous
Implications: Auditors/Risk Managers
• Being “linear” is difficult- we need to do things
differently
• Agile, Practical, Creative
• End result isn’t always understood at the outset
• Tolerate good enough
• Understand cost vs benefit…
• and the requirement to step into the unknown
• Move away from the template approach
I’m Done Ranting
Questions?