• Theme explanation
• Questions
  11. Regulatory risk
  12. Implementation risk
  13. Dependence risk
  14. Timing risk
  15. Reputational risk
• Previous part – Stakeholders
• Next part – Resources

Explanation

The public sector is traditionally risk averse in keeping with its role as the custodian of public funds. However, innovation is not risk-free. Consequently, the emphasis in this third theme is to anticipate which risks are relevant to your idea, consider the possible consequences if they occur and decide how important each risk is to the feasibility of your idea. In this section, we shall focus on five common risks.

• Regulatory risk: includes legislation from all levels of government and regulation imposed by government agencies and non-government agencies
• Implementation risk: the possibility that you may not be able to bring together the right people, equipment, processes and controls to deliver the goods
• Dependence risk: when an idea must rely upon some other public sector organisation, business, process, service, system, person or organisation for implementation
• Timing risk: when an idea does not fit within an organisation’s planning timeframe or the political/budgetary cycles
• Reputational risk: the potential for unintentional consequences that may damage political, organisational or personal reputations.

These are not the only possible risks and you need to think carefully about what other risks might apply to your idea. What about the risk of doing nothing, the possibility that your idea will make staff redundant, the chance your idea will not achieve enough take-up to be financially viable or what if your organisation will not be able to cope with an increased level of activity? If risk exposure is high, then you may want to consider your options. You can accept the risk and work to mitigate it. Serious risks in which countermeasures are unreliable or unavailable may be a reason to consider abandoning an idea.

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11. Regulatory risk

In terms of the relevant laws, regulations and standards, my idea will…

a. meet them without any changes
b. require only minor changes.
c. require moderate changes.
d. require substantial changes.
e. probably not meet them at all

Whereas private enterprise has an obligation to operate in accordance with the law, the legal constraints on public sector organisations, such as freedom of information and natural justice, impose greater limits on the ways in which they can innovate. Regulatory risk covers nearly every aspect of the public sector. Broadly defined, it not only includes legislation from every level of government, but also regulations and standards imposed by government agencies and non-government agencies.

Regulation risk is the danger that laws and other regulatory requirements will have a material impact on your idea. These risks are increasing, particularly with the trend towards a more complex, more comprehensive and sometimes more prescriptive approach by legislators and regulators. Can you comply with the laws, standards, and other regulations that apply to your idea? If your idea does not meet these requirements, then how can this be resolved?

Anticipating legislative and regulatory conditions, how they are interpreted and how they are implemented is a challenge. They are difficult to monitor because the number and variety of laws and regulations can be overwhelming and the complexity inherent in understanding these laws and regulations often makes it impossible to interpret them without costly advice. Also, legislation is written in the context of the present day and the knowable future, so it is not possible for laws to be drafted in a way that effectively accounts for every possible future circumstance. Thus, legislation may unintentionally become a barrier to innovation by preventing an approach or policy that was never contemplated when it was drafted. One mitigating advantage, however, is the role of the public sector in recommending changes to laws and regulations.

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12. Implementation risk

The chance that my idea may fail to get implemented is…

a. very low
b. low
c. moderate
d. high
e. very high.

This question relates to whether your idea will be fit for the purpose you intend. Can you organise the skilled people, the right equipment, the right processes and the right controls to deliver a consistent level of performance?

• What are the key tasks?
• What is the timeframe for delivery?
• What are the milestones along the way?
• Would a phased implementation be a good option?
• Would it be better to implement quickly to avoid losing focus and momentum?
• Are the practical aspects of the roll-out fully understood?
• Will there be a loss of service continuity during the transition?
• Can you learn from mistakes and correct unforseen problems promptly?

If the expertise and resources are available and reliable, then implementation risk is probably low. If it looks like the expertise and resources will be difficult to develop or acquire, then the risk is much greater and it should be carefully investigated. If the expertise and resources are not available now or in the foreseeable future, then perhaps the idea should be abandoned.

If there is a great deal of unfinished development work to do, then there is a greater risk that unforseen problems may occur. An idea that faces a prolonged development effort needs a substantial commitment of time, energy and resources. It represents a greater risk that costs will blow out or the final result may not perform as it was originally envisaged. Implementation risk also increases with the technical complexity of an idea.

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13. Dependence risk

The extent to which my idea will depend on another public sector agency, process, system, or outside organisation is…

a. very low
b. low
c. moderate
d. high
e. very high.

Dependence risk occurs when your idea must rely upon some other public sector organisation, business organisation, voluntary organisation, process, service, system or individual for its implementation. High dependence risk means loss of authority over your idea because you have to rely on something or someone you cannot control.

Public sector organisations, and individual units within them, are often characterised as silos. They tend to operate with different cultures, different procedures and different standards. Dependence risk in the public sector starts with coordination inside your own organisation, increases with coordination amongst other public sector organisations, and is especially high for initiatives requiring whole-of-government coordination.

Gatekeepers are a special category of dependence risk in the public sector. Traditionally, gatekeepers have stood guard over us in order to provide guidance and protection. Their job is usually to say ‘no’ and they say ‘no’ a lot. We are sometimes faced with gatekeepers who try to decide things like what stakeholders should or should not have and sometimes who has the right to be a stakeholder. For example, treasury is usually the gatekeeper for procedures and policies in budgeting, and Crown law is usually the gatekeeper for the oversight of contracts.

Technology is the basis for many public sector innovations, but it also represents a significant source of dependence risk. The hype surrounding the benefits of new technology is not always matched by the reality. Sometimes the technology is not mature, the infrastructure is not in place or it is simply too complicated to be easily installed and used.

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14. Timing risk

The possibility that my idea will fall outside the budget cycle, planning cycle, election cycle or other timing constraint is…

a. very low
b. low
c. unclear
d. high
e. very high.

First, most public sector organisations have a budget cycle. If your idea misses the window of opportunity for inclusion in the next budget bid, then it may lapse altogether or at least until the next round. Second, the election cycle defines another window of opportunity in which politicians may latch onto an idea they believe will appeal to voters. If your idea is not ‘shovel ready’ when an election is called, then it may lapse altogether or at least until the next election. Third, there may be a mismatch between the timeframe for an idea and the organisation’s planning horizon.

• Short-term planning horizons are focused on immediate problems, such as the daily pressures of media and politics, and crises like a computer system crash, which require short-term innovative tactics.
• Medium-term planning horizons are usually focused on core programs in which incremental innovation is the main concern.
• Longer-term planning horizons are usually focused on more radical innovations that reflect emerging issues for the organisation.
• Generational planning horizons are focused on big issues in the very long term that reflect transformational innovations.

Public sector organisations with short time-horizons typically resist innovation. A government with a small majority, ministers facing re-election, senior bureaucrats coming up to their contract renewal or a culture focused on tomorrow’s media coverage usually means a short term perspective and resistance to longer-term ideas.

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15. Reputational risk

The potential for unintended consequences that could result in reputational damage from my idea is…

a. very low
b. low
c. unlikely
d. possible
e. very possible.