2 nd November 2006 Managing Risk and Uncertainty

2 nd November 2006 Managing Risk and Uncertainty in the Public Sector: Corporate Governance - the Key to Success ALARM South East Conference 2006 Judy Jones Risk Consulting Practice, Marsh Ltd Tel: 07787 560658 e-mail: judy. m. jones@marsh. com

Agenda n “Corporate governance” – background to corporate governance in the public sector – what is it? n n What’s it got to do with managing risk and uncertainly? A reality check! © 2006 Marsh Ltd. All rights reserved 2

Corporate governance Background in the public sector © 2006 Marsh Ltd. All rights reserved

Development of the concept 1992 Committee on the Financial Aspects of Corporate Governance (The Cadbury Committee) 1994 The Rutteman Committee 1995 The Greenbury Committee 1998 The Hampel Committee 1999 The Turnbull Committee © 2006 Marsh Ltd. All rights reserved 4

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” © 2006 Marsh Ltd. All rights reserved 5

The Nolan Committee 7 Principles of Public Life Leadership Honesty Openness Accountability The 7

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” 1994: CIPFA “Corporate Governance in the Public Sector” © 2006 Marsh Ltd. All rights reserved 7

Public sector drivers 2000: SOLACE “Chance or Choice - Risk Management and Internal Control Guidance for Local Government” 2001: CIPFA/SOLACE “Corporate Governance in Local Government - A Keystone for Community Governance” 2005: ODPM and CIPFA “The Good Governance Standard for Public Services” 2006: Department of Health “Integrated Governance Handbook” © 2006 Marsh Ltd. All rights reserved 8

“Corporate governance” What is it? © 2006 Marsh Ltd. All rights reserved

A definition of governance The 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] © 2006 Marsh Ltd. All rights reserved 10

An overview of governance n Applies to an organisation or partnership n 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 © 2006 Marsh Ltd. All rights reserved 11

What’s it got to do with managing risk and uncertainty? © 2006 Marsh Ltd.

Core principles of good governance n n n 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 © 2006 Marsh Ltd. All rights reserved n n n 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 13

“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 © 2006 Marsh Ltd. All rights reserved 14

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. © 2006 Marsh Ltd. All rights reserved 15

An effective risk management system should include…. Identifying key strategic, operational and financial risks Assessing the possible effects that the identified risks could have on the organisation 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 Reporting publicly on the effectiveness of the risk management system through, for example, an Si. C 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 © 2006 Marsh Ltd. All rights reserved 16

Risk Management guidance n Turnbull and the Treasury “Orange Book” n National Audit Office n Cabinet Office n Institute of Risk Management (IRM), Association of Insurance and Risk Managers (AIRMIC), Association of Local Authority Risk Managers (ALARM) risk management standard n Specific guidance relevant to various sectors e. g by Audit Commission and education funding councils © 2006 Marsh Ltd. All rights reserved 17

Risk Management guidance (examples) © 2006 Marsh Ltd. All rights reserved 18

A reality check! © 2006 Marsh Ltd. All rights reserved

Where are we now? n RM Policies and Strategies n RM Training n Risk Management Groups n Risks associated with decision-making n Risk management of major change n Projects and partnerships n Embedding RM at all levels © 2006 Marsh Ltd. All rights reserved 20

SUMMING UP and QUESTIONS © 2006 Marsh Ltd. All rights reserved 21

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 permission of 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. © 2006 Marsh Ltd. All rights reserved 22