Question
“How do we equip governments with risk management strategies to enable innovation?”
Nicholas Borsotto Machado Monteiro Lead Economist and Researcher Good Technology Collective
Top Answer
Anders Find Risk Management Advisor Black Swan Institute
Top Answer

Governments tend to be very risk-averse, and that is often a very good thing for society, because
risk-aversion is a healthy habit when you for instance make new legislation on environmental
issues or public health. But risk aversion can also be a barrier to innovation and that could become
a major problem when we try to develop the public sector to be more efficient, to be a sector with
more quality in products, services and processes and to be an attractive workplace.

The risk aversion is unfortunately often raised in areas of high political attention, large innovation
potential but also often areas with big risks. In the area of digitization and e-government we've
seen catastrophic IT-projects in the public sector that have run way over budget, over time and
have delivered no value to the citizens. In Denmark we've seen major scandals over the last decade
in projects and programmes trying to delivery new IT administrative systems to for instance the
police, defence, taxation and so on. Several of the scandals also became political scandals. The
key learnings from the projects are that the responsible management often was unaware of the
risks of the projects - they had no formal risk management strategy to help to mitigate those risks.
Auditors and external reviews have documented that extensively over the last couple of years in
Denmark.

The scandals have put pressure on the public sector to become more mature in its risk
management, but unfortunately it seems in many areas that the cost of that effort often is a very
HIGH risk-aversion that often hinders innovation in new projects. Many managers and executives
in the public sector institutions have become very afraid of IT and digitization projects - and in
Denmark we often talk about a growing "zero error"-culture that can be very negative to innovation
efforts.

On that background it is very important that we equip leaders in the public sector with balanced
risk management strategies that give them the opportunity to handle threats to their objectives
BUT also provide them with a strategy that enables them to handle innovation opportunities in their
programmes and projects. The standard risk management frameworks that we use are often only
used to look at threats and with increasing risk awareness that can be a severe challenge to
innovation. But actually, our risk management frameworks, for instance Management of Risk,
which have been developed by the British government, also provide government institutions with
strategies to handle innovation opportunities as positive risks.

We must therefore train our public sector leaders to use their risk management processes and
methods also to focus on positive risks - innovation opportunities - instead of only looking into
threats and in that way develop more balanced risk management strategies that both look to
threats and opportunities.

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