risk provisioning and government policy2 copyright 2009 prof. jim norton 3 some perspectives on...

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Risk provisioning and Government policy: Personal experience of risk in Central Government

Cambridge Centre for Risk Studies

10th December 2009

Prof. Jim Norton!

External Examiner – UK Institute of Directors Certificate in Company

Direction!

Vice-President – Professionalism!BCS – Chartered Institute for IT!

External Director!UK Parliamentary Office of Science &

Technology (POST)!

www.profjimnorton.com!

Copyright 2009 Prof. Jim Norton 2

Issues to be covered

• Background and context.

• To begin at the beginning…

• Flaws in the fundamental framework? • An imbalance of power?

• Final thoughts. (Plus some fun at the expense of the airline industry)

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Some perspectives on “Risk”

•  "Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness…. Whatever you can do, or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now." - Johann Wolfgang Von Goethe

•  “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success than to take the lead in the introduction of a new order of things”. Niccolo Machiavelli from The Prince

•  “Business without risk is like farming without water” from “Managing Uncertain Markets”


A personal perspective

The RA was:

•  A UK 'Next Steps' Agency created in 1990.

•  Responsible for most aspects of UK civil radio spectrum negotiation, management and enforcement. Plus all international spectrum negotiation.

•  In 1996 had 540 staff and a turnover of £40M.

•  Net Running Cost regime with UK/DTI and Treasury.

•  Ultimately absorbed into Ofcom following the UK Communications Act 2003…

At 19:02 on the evening of Friday 9th February 1996, a bomb weighing some 4000 Kilos, planted by the Provisional IRA, exploded at South Quay in London’s Docklands close to the HQ of the UK Radiocommunications Agency (RA).

It marked the end of a terrorist ‘ceasefire’.

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The extent of damage to the RA HQ Building

RA coped because we had a very good senior team and because we had spent time on risk & business continuity planning….

South Quay 3


Setting the scene - risk in the public sector

Risk is an essential element of private sector business. The public sector is little different, though the management of Ministerial expectation is is often more challenging than those of other stakeholders… The crux of success is how that risk is identified, managed and controlled; and staying one step ahead of the Ministerial agenda.

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• Final thoughts.


My introduction to the facts of Central Government life…

•  Appointed in 1993 as Chief Executive (and Accounting Officer) of the UK Radiocommunications Agency (part of DTI).

•  Treasury could not accept that any private sector appointee would understand Government accounting.

•  Sent on a mandatory 3-day course– the only useful part was half a day on “Appearing before the Public Accounts Committee” featuring Robert Sheldon MP the PAC chair.

An introduction hinged on the presumption of failure….

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Words of wisdom from a veteran PAC chair •  Lord Sheldon was Labour MP for Ashton-under-

Lyne from 1964-2001. Chair of the Public Accounts Committee (PAC) from 1983 until 1997.

•  “Three things will give you a staring role before my committee:

•  Leading an Executive Agency;

•  Relocating your headquarters; or

•  Renewing your IT Systems”

I was busy doing or planning all three – a very high risk prospect…


A challenge for my successor

•  In my five year term (1993-98), I avoided appearing before the PAC, however my successor was summoned in my stead...

•  Through a dire EU procurement process, we established a very successful public-private partnership joint venture to provide IT services for my Agency. 35% owned by Secretary of State 65% by Logica-CMG. It recovered its costs inside the first 12 months. But my successor was summoned because I had ran 200% over-budget on legal costs in the procurement process…

I requested to appear but was told it had to be the current Accounting Officer. Prosecuting the innocent…

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Flaws in the fundamental framework - 1 Extract from a joint letter from the Director General - IoD and the President - IEE to Cabinet Secretary Sir Gus O’Donnell 10th February 2006:

“The ‘Shared Services’ agenda will require substantial accountability changes… We suggest that you will need to clarify the responsibilities at the Accounting Officer/Permanent Secretary level where functions are internally "contracted out" to Agencies or equivalent bodies that may be supporting several Departments. We suggest that this is particularly important with respect to responsibilities to the National Audit Office (NAO) and the Public Accounts Committee (PAC). At present there are perverse incentives for Departments to operate in silos and to duplicate rather than co-operate. Similarly, robust mechanisms are required to facilitate benefits sharing where cost-incurring action by one Department is required to facilitate larger savings in another Department.”

Sir Gus’s reply could be paraphrased as: “trust me I will fix this…” Essentially nothing has happened.

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Flaws in the fundamental framework - 2 A further extract: “Realistic budgeting based around a holistic view of business change… You may need to intervene to develop a culture of more realistic budgeting. Both of our organisations are concerned that, once again, Government strategy is focusing more on investment in technology than in the complementary, larger, investment in the people and business processes required to deliver effective service improvements (both internally and externally). Our professional opinion is that to deliver effective and sustainable change, the IT element is likely to represent the minority of the programme investment, with spending on people and process likely to be between one and three times greater than IT, dependent on the nature of the service to be delivered.”

Again this has been roundly ignored by the Treasury …







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An imbalance of power?

In a second or third term, what is the balance of power between a Secretary of State and their Permanent Secretary?

As an example – Family Tax Credits. The Treasury Board were well aware that every single indicator on the supporting IT project was at ‘red’ but they pressed on because it was a key political goal for the then Chancellor. The result was a disaster for all concerned…

A careful balance, Permanent Secretaries should not frustrate Government policy, but they should feel empowered to offer credible warnings…







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Some final thoughts…. •  The identification, management and control of risk, and

accountability for this, is at the heart of all successful operations in both private and public sectors.

•  The way in which Accounting Officers are held responsible to Parliament can make or break major cross-cutting ‘business change’ initiatives. The current arrangements are inappropriate and need reform.

•  There is an need for more robust processes for assessing and feeding back the implementation risk of major policy options.

•  An incoming Parliament and Administration must address these issues – particularly in terms of the genuine efficiency savings now essential…


But remember, managing risk is a continual battle. Don’t ever sit back and believe that you have

won!

Oh dear…!

Presentation can be Downloaded from: www.profjimnorton.com/govrisk1.pdf

risk provisioning and government policy2 copyright 2009 prof. jim norton 3 some perspectives on...

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