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Fear of failure can be managed with smart risk understanding: Halton

Commonwealth agencies must overcome deep cultural patterns to develop the more sophisticated risk management approach demanded by public management reforms and, ultimately, their external stakeholders.

The constant calls for the Australian Public Service to become less risk-averse are not going away, but neither have they fallen on deaf ears over recent years. The push for the public service to improve risk management from external organisations was a major influence behind sections 17 and 18 of the Public Governance, Performance and Accountability Act (PGPA).

“These sections came about because those who worked with the Commonwealth — commercial partners, the community sector and the states and territories — told us that partnering with the Commonwealth could be a really bad experience,” said Department of Finance secretary Jane Halton.

[pullquote] ” … our commercial and corporate entities are much more practiced at this. We need to catch up, as departments of state.” [/pullquote]

“Broadly speaking, they said that we have the money to get things done, but that we are risk-averse and afraid to innovate.

“Our thinking is dominated by fear of failure, rather than the prospect of breakthrough success; we push risk onto other parties and micromanage how they fill their side of the bargain.”

In her Friday lecture hosted by the Senate, which aimed to explain the complex suite of reforms to interested members of the public, she said this loud chorus of criticism “went to the core” of what PGPA aimed to do: create an “agile, modern, connected and responsive Commonwealth public sector”.

Public policy innovation is only possible through “engaging with risk, finding new ways of doing things, backing good ideas and putting faith in others” in Halton’s view.

James Graham, a senior consultant legislative drafter with the Australian Government Solicitor, asked Halton if she thought the measures in the PGPA Act would be sufficient to overcome the “pressure” to avoid certain risks — such as embarrassing the minister — at all costs, and how long she expected the cultural shift to take.

“Psychologists tell us people are bad at assessing risks and very bad at appreciating that their assessment is a gut feeling and not a careful analysis,” said Graham, prefacing his question.

“The other thing is our society generally is becoming more and more risk-averse, to the point where avoiding risks and being safe is something people do almost instinctively, without thinking about it.

“In my work, one of the risks that I often have to avoid is something that might embarrass the minister. Given that as I understand it, in order to be a minister one has to have the hide of a hippopotamus or no capacity for embarrassment at all, this has always seemed an odd risk to need to avoid.”

Institutional, not individual

Halton was optimistic as ever about the chances of success but didn’t want to guess at the time frame.

“It’s not about one individual’s inability to measure and monitor … it’s about the institution thinking about what its risk framework is, what its risk appetite is, and then calibrating its use of resources,” she replied.

“Now, interestingly, I think this also makes it easier for administrators to talk with the [auditor-general’s office] about how they have used their resources.”

Halton reiterated that a more sophisticated approach to risk management was not the same as being reckless, and told Graham she saw departmental processes shifting:

“It’s new, yes. How long will it take? I wouldn’t want to predict. But I can tell you in my organisation, and certainly in my former organisation, those conversations have gone from being intermittent, to now being institutionalised.

“[There are] risk committees who are actually thinking … about large institution-wide risk as well as the micro-risks that you’re managing.

“You’re actually making sure that your senior management team understand what those institution-wide risks might be. So I wouldn’t want to have a crystal ball out to tell you it’ll all be fixed in two years, but what I can tell you is I can really see an improvement in maturity in this area, and we have to learn how to do this together.

“So I’m optimistic … and if you look at some of our commercial and corporate entities, they have been much more practiced at this. We need to catch up, as departments of state.”

Learn to live with risk and co-operate

Section 17 of the new act requires all federal entities to co-operate with others to achieve common objectives, where practicable.

“The Commonwealth needs to partner with others,” Halton said in her speech. “
This section says, in effect, we expect you to do it if it is the right thing to do.”

She said “joined-up government and a joined-up community” would help solve long-term disadvantage and chronic health issues, improve education outcomes and strengthen domestic security. Halton acknowledged there was “still lots of work to do on this front” and, although the PGPA Act had removed some “legal and technical issues”, she said some of the main challenges might need to be addressed through federation reform.

Halton said the message to federal entities in section 18, which deals with risk management, was: “When you do join up, think carefully about the requirements you place on others in relation to the management and use of public resources.”

The Finance secretary said the point of improving risk management was knowing when to push the limits, and when to guard against implementation disasters — and not loading partners up with red tape to shift as much risk onto them as possible.

“We cannot afford another catastrophic failure like the Home Insulation Programme, where negligible effort was put into understanding the operating environment for the roll-out.

“But neither can we afford government programmes that don’t innovate or sensibly push boundaries at all because they are designed to exclude even the most immaterial risks.”

Author Bio

Stephen Easton

Stephen Easton is a journalist at The Mandarin based in Canberra. He's previously reported for Canberra CityNews and worked on industry titles for The Intermedia Group.