ERM VALUE IN PUBLIC SECTOR BUT APPLICABLE TO PRIVATE SECTOR
10 Jun 2019
Literature is scarce of what ERM has saved as the savings are not visible due to ERM preventing them or keeping the losses minimal.
At a national or state government level the risks are more related to implementation of policy and political. Where these policies move into projects then project risk management kicks in. Project risk management has amazing benefits and spectacular losses if not applied - power stations in SA costing over 300* what they should. State owned companies, utilities and infrastructure related ministries will have real benefits of ERM.
Where ERM can be seen in work is for insurance. Insurance is really a limitation on losses when a risk occurs. Understanding of risks ensures insurance is applied where needed and at the value covered. ERM can reduce premiums as well. ERM provides for contingency funding when assessing risks and understanding the possible exposures to risks. Project contingency funding is a direct result of risk management.
The below article is relevant there:
Being Ready for a Crisis
An effective response starts long before the catastrophe occurs, with governance and relationships, advance preparation, and the ability to test your practices.
Risk management has the prevent elements and detection elements. Prevent reduces the probability of an event happening and detection limits the losses when an event occurs. The losses prevented are difficult to determine as no event occurred. Risk consequence can be measured by the losses suffered. Many organisations maintain a loss incident approach that is used to learn from the events and to minimize the exposure. Incident management is a key element of ERM. Any organisation can apply this measure of ERM to their operations and understand better the causes and nature of risks they are exposed to. However, knowing of the possible risks is forearmed to be able to prevent them before they become a loss incident.
Nigeria's economic fortunes on the back of the oil price has been a massive influencer of risk on the whole economy and experienced at the micro level. Has Nigeria learned from the recession and has the public sector learned from the consequences of the change in fortunes? My answer id probably no!! With improved oil prices comes more opportunity for greed and corruption and worry about the next recession when it happens.
So in conclusion. ask the client/ organisation for their incident management/ loss register to sell ERM. If they do not have such a register there is one good recommendation you can make and if they do have such a register determine which of these could have been prevented in the first place if proper ERM had been applied. Learning from your own losses is good, learning from the losses of others is even better.