In presentday, the borders which separate the public and private sectors are have becomeincreasingly blurred.
The delivery of what were traditionally seen as publicservices today requires agencies from both sectors. An example being socialservices, which relies heavily upon governmental funding and strategicdirection as well as the private sector for service delivery. When looking atsuch a system as a whole it is sometimes difficult to say where one ‘sector’ends and another begins.
Therefore, it could be said that the principles ofrisk management are largely universal because different organisations fromdifferent sectors tend to exist together within the same policy system (Mikes,2011). Agencies from different sectors have largely similar organisationalforms, similar tasks being performed and, at a fundamental level, similar risksto people, property and processes. However, some profound differences need tobe stressed in terms of risk management in relation to the public-private distinction(Woods, 2011). The key differences rest in:- Thefundamental objective of each type of body (one is profit seeking and the otheris service providing);- Thenetworks of stakeholders that each organisation needs to engage with and isaccountable to;- Theimportance of the social and political environment to eachQuitesimply, the private company has a fiduciary obligation to provide profits anddividends to a relatively small number of shareholders. The public agency,however, exists to provide a service to a target group or the community ingeneral. This is hardly surprizing news to anyone, but the importance of thisdistinction plays out in different risks.
Many public sector agencies neverhave to worry about bankruptcy and liquidation. Private companies generally donot need to worry too much about the reform agendas of a new government.Changes in government, however, reflect public attitudes about public servicefunding and these can pose real threats to many public agencies. Many privatecompanies will never need to open their finances or operational processes topublic or political scrutiny, but the public sector agency is always subjectedto accountability for its operations and funding. Many people are also unawareof the existence and roles performed by private companies unless they directlyneed to purchase a service. As a consequence, they are not subject to the same kindof public debate that surrounds public service provision.
Everyone has anopinion on education, health and refuse collection, for example, because thesepublic services directly affect the lives of the public who are allshareholders by virtue of the taxes that they pay. Hence, while the privatecompany might look towards technological or competitive environments to defineits key risks, public agencies need to look more towards social and political environments(Woods, 2011).Another keydifference relates to the risk management process. In the public sector thereis less of risk taking activity due to a lack of profit incentive. When we alsofactor in decreasing levels of public tolerance of risk, allied to anincreasing ‘claims culture’, we find explanations for why many public sectororganisations adopt a risk-averse approach to managing risk.
Many examples canbe found in local government, where children’s play areas have been dismantled,because of the risk of injury, trees have been cut down in case they fall onto roadsand schools have been turned into fortresses with controlled entrances and CCTVsystems in place to deter vandals, thieves and others who might seek to doharm. The challenge, particularly for public sector risk management, is tounderstand the interdependencies of risk at play and to be clear that aparticular risk management strategy not only deals with the risk at hand in theway that it is intended to but also enhances the overall objectives andstrategic goals of the organisations (Crawford, 2010).