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RISK MANAGEMENT IS THE KEY TO GOOD CORPORATE GOVERNANCE

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Public sector organisations need to embed risk management into all their activities if they are to successfully ach...
Public sector organisations need to embed risk management into all their activities if they are to successfully achieve standards of good corporate governance according to a new report published by the ALARM, the national forum for risk management in the public sector.

The report says that the risk manager has a crucial role to play in the organisation's strategy for corporate governance and maintains that it is impossible to achieve corporate governance without effective risk management and internal control.

Designed as a checklist to ensure that good governance is in place, the report identifies 18 steps for practical action to help public organisations establish a comprehensive risk management programme.

Published with support from Zurich Municipal Management Services, it is aimed at chief executives, senior managers, elected members and non-elected board members of public sector organisations. Key considerations include:

- Ensure that corporate governance is driven from the top of the organisation

- Establish a formal process for advising senior management about the risk implications of decisions

- Review the risks across the whole organisation and develop an organisation-wide risk profile

- Consider how the organisation identifies and analyses its risks to ensure that the techniques are sound and appropriate

The report calls on public sector organisations to review their existing corporate governance arrangements against the guidelines and modify where necessary to ensure that robust arrangements are introduced where gaps are present.

The guidelines will help public bodies when they are required to make a statement of corporate governance compliance in their annual report and accounts.

Ian Horwood, author of the ALARM guide, and vice-chairman of ALARM said:

'Good governance is essential to improving the strategic, operational and financial management of an organisation. One of the keystones to achieving effective corporate governance is an integrated and holistic approach to risk management. It will help public bodies maximise opportunities and minimise risks which might result in financial losses, service disruption, bad publicity, threats to the public or claims for compensation.

'However, this is very much a cultural issue and senior managers will need to look beyond the traditional boundaries of risk management to ensure it is effectively integrated into the strategic planning and decision-making of the organisation.'

Sarah Richards, management advisor at Zurich Municipal Management Services said:

'Risk management is not a discipline that can be limited to one person within a public organisation. It cuts across both strategic and operational aspects of delivering public services. By firmly wedding risk management to corporate governance initiatives public bodies will ensure that they manage services with the appropriate balance of innovation opportunity and risk.'

The report - Corporate Governance in the Public Sector: The Role of Risk Management will be distributed free to ALARM member organisations. Additional copies and copies for non-members can be purchased from the ALARM Administration Office - Tel: 01395 223399, Email: admin@alarm-uk.com. A summary is available on request from LGCnet.

An ALARM seminar on corporate governance is being held in the Midlands on 16 October. Involving Zurich Municipal Management Services the seminar aims to help public bodies establish a comprehensive risk management programme which will form a cornerstone of their corporate governance arrangements.

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