Insurance Post

Closer harmony

Recent research by Alarm shows that public sector organisations are failing to run collaborative and partnership projects effectively. Edward Murray examines what can be done to provide closer harmony.

The majority of public sector organisations are failing to run collaborative and partnership projects effectively at a time when there is a growing reliance on this integrated way of working.

In research carried out over the summer at public risk management association Alarm's annual conference, 60% of the public sector risk management delegates asked said their organisations did not have appropriate risk management frameworks in place for effective collaborative working.

Indeed the survey went on to say that more than two-thirds of those questioned (68%) believed their organisations did not have sturdy procedures for developing, assessing and challenging the business case for collaborative working projects.

Despite this the majority of these same delegates (78%) did feel their organisations were good at thinking about how to incorporate collaborative working arrangements and believed management were open to new ideas and possibilities in this area.

So, while the heart may be willing, it seems the body is not yet able when it comes to making the most out of what collaborative working has to offer in the public sector. While the research, carried out by Marsh, has helped bring this issue to the fore, it is not the only party that has been looking at this problem with a growing degree of consternation.

The House of Commons Public Accounts Committee's 2009 report Central Government's Management of Service Contracts found there were no documented plans for managing 28% of contracts while a further 56% had no contingency plan in the case of supplier failure.

How can the public sector hope to deliver the best services and derive the potential benefits of collaborative working, if there is no contractual basis laid down for what these partnerships should achieve and how they will be maintained should problems arise?

In a paper commission by Zurich Municipal and published this June" Public sector supply chain: risks, myths and opportunities" the insurer highlighted just how long the public sector had been challenged with working in conjunction with other organisations. The report said: "Outsourcing and partnership working is not new. Beveridge believed in 1948 that the State should take the lead in slaying the 'five giants of want, disease, squalor, ignorance and idleness,' but believed that 'it could not do it alone'."


Significant acceleration

It is also interesting to note that as time has unravelled over the half century since social reformist and economist William Beveridge made his comments, there has been a significant acceleration towards working in partnership as the delivery of public services has become a more complicated and involved job for those tasked with doing it.

Indeed it is the sheer complexity in the relationships and partnerships that public sector bodies now manage that has shown up so clearly the faults that exist in their risk management strategies.

Andrew Jepp, head of local government at Zurich Municipal, comments: "Authorities have been outsourcing contracts for some considerable time, but I suppose it is the plethora of activities that authorities now get involved in [that creates problems] and it is no longer just about collecting refuse or providing housing or leisure services."

There has been a significant move in the role performed by public authorities and the lead they are now asked to take in our society and Mr Jepp adds: "These guys are in the business of leading communities and building sustainable communities and that is a very different world and environment from the organisations that were previously there to deliver a fairly well defined range of services."

Like Beveridge and many others since, Mr Jepp believes these services cannot be delivered unilaterally and he says: "Place shaping and community leadership cannot be delivered in isolation and they have to be delivered in association with a number of other organisations and that is a much more complex arrangement."

Mr Jepp does not excuse the poor risk management processes that are in place to oversee many of the joint venture contracts out there, but his comments do go some way to explain how their ever more complex nature may have caught up and overtaken existing systems that were not designed to deal with them.

This is a point that Brian Shaw, who heads up the UK public sector practice at Marsh, takes up: "Partnerships have evolved and it is only latterly that risk management frameworks have been introduced and they haven't necessarily been applied retrospectively to partnerships that have been in existence for some time."

As such, it is of little surprise that many of the existing relationships are not being managed as well as they could be. Equally it is to be expected that it is difficult to create a culture of introducing risk management frameworks and structures at the beginning of new collaborations when they do not exist for those already in place.

It also appears that there have been one or two shortcuts taken and, as is so often the case, these have not led to long-term gains. As an example, Anna Kingsmill-Vellacott, founder of AKV Associates and a consultant in insurance, construction and risk solutions, says the Office of Government Commerce's Gateway Process, which evaluates construction projects, is fundamentally flawed. In theory the assessment is an excellent idea, but in practice it is not designed for the job at hand.

She explains: "The analysis gateway points are not in the right place. It was constructed for IT projects and shoehorned into use for other projects and so you do not get the rigour of results."

Clearly problems exist. There are numerous examples of projects that have failed to deliver their initial objectives and other very public examples of cases where poorly delivered services have resulted from a failure of adequate process management between organisations working together.

However, does the insurance industry have a role to play in this area? 'Yes' and 'no' both seem to answer the question. Most of the risks involved are not insurable and the issue is more one of mitigation and risk management than straight insurance.

Nick Chown is a risk consultant with VP Risk Consultancy and has extensive experience in the public sector having worked with Royal Mail and the Metropolitan Police as a risk manager. He says: "I'm not sure how big a role the insurance industry has to play. The main role is to role model effective risk management and we know that the banking industry has, perhaps, demonstrated of late that its risk management could have been better and the insurance industry has come out of things a lot better. Many insurers have demonstrated that managing risk is something they know about and for me it's about role modelling and requiring a good level of risk management from potential clients when presenting their risks."

While there may not be a significant amount of cover for insurers and brokers to sell in this area, public sector organisations are, nonetheless, some of their biggest customers and there are also consultancy fees to earn for the work they do on certain risk management projects.

Both Marsh and Zurich Municipal, along with other players in this market are keen to illuminate themselves as leading the thought process in this area and being able to help clients at least manage, if not insure, their risks.

As Mr Jepp comments: "We are in the business of working with our clients to help them manage risk full stop and the onus is on us, who understand the management and mitigation of risk to help our customers place appropriate controls to mitigate their own risks."


Huge achievements

Yet, while it might be easy to portray risk management in regard to collaborative projects in the public sector as a flapping wingless bird, that would be misrepresentative and unfair. The public sector has achieved a huge amount in the sphere of risk management and while there is still much to do, the consensus is that in many areas it has overtaken the private sector.

Unsurprisingly, this is a view championed by Dr Lynn Drennan, chief executive at Alarm, but she is not overstating the point when she says: "The public sector and local authorities in particular have got really robust risk management structures in place.

"Public risk management has been on the go for a long time and they are very good at managing the individual risks within the organisation."

Equally, she realises that the increasing level of collaborative activity and the complexity of the projects in question has thrown up a whole new raft of challenges to deal with, but she adds: "The positive news is that organisations are a lot more aware of these issues."

What is interesting is that while much of the criticism of the processes and practices in place has been around collaborative working, the solution may actually be found in how organisations approach their own internal risks.

If public sector bodies do not prioritise risk management or have an existing culture that runs over an established and well-worked set of risk management frameworks, then why would they suddenly start to operate in this way when it comes to working with others?

Although there is no denying that the public sector has made significant strides in its approach to risk management, as Dr Drennan suggests, it seems that there is still some way to go before risk management cultures form the bedrock of public sector bodies and underpin everything that they do as a matter of course.

Judy Jones, head of public sector risk consulting at Heath Lambert, certainly believes that public sector organisations have to get their own house in order before they can hope to succeed in partnership with others and she comments: "The findings of the Marsh survey are consistent with our experience, and raise interesting questions about the extent to which risk management is truly embedded within public sector organisations. If it's truly embedded, the means of service delivery should be irrelevant and the risk management framework should be equally robust whether services are delivered by conventional means, through shared services, strategic delivery partnerships or any form of collaboration."


Individual ability

Mr Chown also feels that good risk management relies on the individual ability of each organisation working within a partnership and says: "Risk management in a partnership context is no better than risk management in each of the individual partners and the more partners you've got the more difficult it becomes."

In highlighting three major areas for improvement, Ms Jones says Heath Lambert would like to see much better formal guidance introduced to the governance of collaborative projects with much more detail agreed over the expectations for risk management at each stage of the project.

She believes risk management should also be part of an organisation's standard training, with sessions being run not only for internal staff but also for partners, to help create a single and standard methodology for the project that has been agreed by all stakeholders.

Finally she says risk managers themselves are not engaged early enough in projects and concludes: "In our work with risk managers across the UK we note a degree of frustration that they're not engaged at an early enough stage and able to provide input to the risk management framework for collaborative arrangements."

The key to improving in these areas is to have support for a risk management-led agenda and this will only happen when risk managers have support for what they are trying to achieve from the boardroom down.

In turn, this is only likely to happen when financial pressures force the issue and in the current climate with public spending cuts in the post, the emphasis to get things right and work effectively and efficiently has never been stronger.

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