2nd november 2006

Judy Jones Risk Consulting Practice, Marsh LtdTel: 07787 560658e-mail: [email protected]

Managing Risk and Uncertainty in the Public Sector: Corporate Governance - the Key to Success

ALARM South East Conference 2006

2nd November 2006

© 2006 Marsh Ltd. All rights reserved 2

Agenda

“Corporate governance”

– background to corporate governance in the public sector

– what is it?

What’s it got to do with managing risk and uncertainly?

A reality check!

Corporate governanceBackground in the public sector


Development of the concept

1992 Committee on the Financial Aspects of Corporate Governance(The Cadbury Committee)

1994

1995

1998

1999

The Rutteman Committee

The Greenbury Committee

The Hampel Committee

The Turnbull Committee


Public sector drivers

Nolan Report into Standards in Public Life

DETR “Modernising Local Government 1999”

Audit Commission “Called to Account”

CIPFA “Framework for Public Service Bodies”

CIPFA “Corporate Governance in the Public Sector”


The Nolan Committee7 Principles of Public Life

The 7 Principles of Public Life

Openness

Objectivity

IntegritySelflessness

Accountability

Honesty

Leadership



Nolan Report into Standards in Public Life

DETR “Modernising Local Government 1999”

Audit Commission “Called to Account”

CIPFA “Framework for Public Service Bodies”

1994: CIPFA “Corporate Governance in the Public Sector”



2006: Department of Health “Integrated Governance Handbook”

2005: ODPM and CIPFA “The Good Governance Standard for Public Services”

2001: CIPFA/SOLACE “Corporate Governance in Local Government - A Keystone for Community Governance”

2000: SOLACE “Chance or Choice - Risk Management and Internal Control Guidance for Local Government”

“Corporate governance”What is it?


A definition of governanceThe local authority context

“Governance comprises the systems and processes for the direction and control of local authorities through which they account to, engage with and lead their communities.”

[Source: CIPFA/SOLACE Good Governance in Local Government: A Framework Consultation Draft June 2006 Paragraph 1]


An overview of governance

Applies to an organisation or partnership

Aims to ensure that it:

– fulfils its overall purpose

– achieves its intended outcomes for citizens and service users;

– and operates in an effective, efficient and ethical manner

What’s it got to do with managing risk and uncertainty?


Core principles of good governance

Focusing on purpose and on outcomes for citizens and service users

Performing effectively in clearly defined functions and roles

Promoting values for the whole organisation and demonstrating the values of good governance through behaviour

Taking informed, transparent decisions and managing risk

Developing the capacity and capability of the governing body to be effective

Engaging stakeholders and making accountability real


“Taking informed and transparent decisions and managing risk”

Being rigorous and transparent about how decisions are made and listening and acting on the outcome of

constructive scrutiny

Having good quality information, advice and support to ensure that services are delivered effectively and are

what the community wants/needs

Making sure that an effective risk management system is in place


An “effective RM system”

A planned and systematic approach to identifying, evaluating and responding to risks and providing

assurance that responses are effective.

Should consider the full range of the organisation’s activities and responsibilities, and continuously check that

various good management disciplines are in place.

Supports the annual statement on internal control.


An effective risk management system should include….

Identifying key strategic, operational and financial

risks

Identifying key strategic, operational and financial

risks

Assessing the possible effects that the identified risks could have on the

organisation

Assessing the possible effects that the identified risks could have on the

organisation

Agreeing on and implementing

appropriate responses to the identified risks

Agreeing on and implementing

appropriate responses to the identified risks

Putting in place a framework of assurance from different sources to

show that risk management processes, including responses, are

working effectively

Putting in place a framework of assurance from different sources to

show that risk management processes, including responses, are

working effectively

Reporting publicly on the effectiveness of the risk

management system through, for example, an

SiC including, where necessary, an action

plan to tackle any significant issues

Reporting publicly on the effectiveness of the risk

management system through, for example, an

SiC including, where necessary, an action

plan to tackle any significant issues

Making it clear that the governing body carries

ultimate responsibility for the risk management

system

Making it clear that the governing body carries

ultimate responsibility for the risk management

system


Risk Management guidance

Turnbull and the Treasury “Orange Book”

National Audit Office

Cabinet Office

Institute of Risk Management (IRM), Association of Insurance and Risk Managers (AIRMIC), Association of

Local Authority Risk Managers (ALARM) risk management standard

Specific guidance relevant to various sectors e.g by Audit Commission and education funding councils


Risk Management guidance (examples)

A reality check!


Where are we now?

RM Policies and Strategies

RM Training

Risk Management Groups

Risks associated with decision-making

Risk management of major change

Projects and partnerships

Embedding RM at all levels


SUMMING UP

and

QUESTIONS


Marsh is authorised and regulated by the Financial Services Authority.

The information contained herein is based on sources we believe reliable, but we do not guarantee its accuracy and it should be understood to be general insurance information only. Marsh makes no representations or warranties, expressed or implied,concerning the financial condition, solvency or application of policy wordings of insurers or reinsurers. The information is not intended to be taken as advise with respect to any individual situation and cannot be relied upon as such. Insureds should consult their insurance advisors with respect to individual coverage issues.

This document or any portion of the information it contains may not be copied or reproduced in any form without permissionof Marsh Ltd , except that clients of Marsh Ltd need not obtain such permission when using this report for their internal purposes.

Statements concerning tax, accounting or legal matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and may not be relied upon as tax, accounting or legal advice, which we are not authorised to provide. All such matters should be reviewed with the client’s own qualified advisors in these areas.

2nd november 2006

Documents

public lifedetr

public sector drivers2006

public services2001

public service bodies1994

local government

cipfasolace good governance

values of good governance

managing risk