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Our latest blog explains what enterprise thinking is and why you need it for risk management across a whole system.

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Step back and see the full picture: lessons learned in risk management   

Posted on March 1, 2022 by

Confessions of a risk manager

A few years ago, I decided to renovate my bathroom, it wasn’t a small feat and required all new electrics, plumbing, new boiler, the works. I was reliant on contracted experts to get the results I wanted. I decided to handle the project management myself, I was confident, I’m a risk manager after all! Once the project was underway little things began to go wrong, delays, disruptions and scheduling conflicts cascaded, and I found myself in the middle firefighting. I could manage some of the problems myself, but most of the uncertainty was coming from the people and expertise outside of my direct control. I’ve made a resolution this year to start the next renovation project and I know that to succeed, I will need to learn the lessons from the past.  

Enterprise thinking

Uncertainty is at the heart of risk management, and without a doubt we have been living in very uncertain times over the last two years. The impact of the pandemic has been felt across all sectors and has redefined the risk landscape. Here at the NAO, the increased level of uncertainty has influenced our programme of value for money and insight work. It sharpened our focus on the arrangements in place for government to identify, evaluate, and respond to risks. In our latest preparedness report: The government’s preparedness for the COVID-19 pandemic: lessons for government on risk management we found the pandemic has exposed vulnerabilities in government’s approach to managing whole-systems risks and that lessons, that would have helped prepare for a pandemic like COVID-19, were not fully implemented.

Enterprise thinking in risk management allows us to integrate the practice of risk management across the whole system, from strategic decision making to execution and delivery. However, looking at uncertainties inside the organisation won’t give us the full picture about what is happening outside and across other organisations. We need to step outside and look out into the extended enterprise. If we think of an organisation as a castle, the extended enterprise refers to anything outside of the castle walls. To go back to my project, I was on the inside and close to the project, I wanted the project to succeed, clouded by optimism and missing the full picture. I’d forgotten to account for what might be happening outside of my “castle walls” and how uncertainty would impact what I was trying to achieve.

I am of course not alone in having optimism bias. Being close to the detail is not a bad thing, in fact it’s often vital, but when we’re on the inside it’s much harder to cast our view out to the horizon and to see the uncertainties just out of focus. We need to see the whole system in order to anticipate, coordinate and prepare for what might happen, even if we’re really hoping it won’t.

Connecting the dots

By taking an enterprise approach to identify, evaluate, and respond to risks, we get a better understanding of the full picture. We can see the interdependencies and connections between the various risks facing the delivery of objectives. The NAO’s reports NHS backlogs and waiting times in England and Reducing the backlogs in criminal courts are both clear examples where identifying the complex interdependencies and taking a whole-systems approach will be needed to tackle and improve outcomes. For instance, understanding the inherent risks of harm to patients as a result of longer wait times, and the cascading impact this could have on local partnerships, community support and organisations outside of the NHS.

Yet, applying this thinking to the extended enterprise of government will also be necessary to tackle and achieve some of the most complex risks of today and of the future. In our report Achieving net zero we concluded that the all-encompassing nature of net zero means that all government bodies, including departments, arm’s-length bodies, and executive agencies, have a role to play. This is perhaps the clearest example of the importance of whole-systems thinking and enterprise-wide risk management.

Opportunities

We mustn’t forget that uncertainty can generate both threats and opportunities. We’re often taught to see risks only as threats. However, those threats can also present us with opportunities to improve, providing we have the desire, agility, and resilience to respond and act. I’ve already started planning for my next project and I know that by applying the lessons learned from last time I can increase my chances of success.

As we continue to recover from what we hope is the worst of the pandemic, it’s important to look at the full picture, identify the lessons and apply improvements where we can. Our lessons learned programme of work at the NAO has highlighted opportunities to strengthen government’s approach to risk management, to ensure that it includes a clearer view of whole system risks. Applying this learning will require collaboration not only within and across government but also across sectors and the entire extended enterprise. The challenge questions is: who is providing the enterprise view of risks across the whole of government and what other lessons are there to be learned?

You can read more about our findings and insights on our website.  Links to the specific reports and topics explored in this blog are set out below:

Please feel free to comment and share your thoughts, your views are very welcome.  

About the author

Russell Heppleston

Russell Heppleston

Russell Heppleston is a Risk Manager for the Financial and Risk Management hub at the NAO. He joined the NAO in 2021 as an experienced risk manager with over 15 years experience working in Local Government, specialising in internal assurance, risk and governance. He is a Chartered Internal Audit Leader (QIAL) and Certified Risk Manager (CMIRM).


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One response to “Step back and see the full picture: lessons learned in risk management   ”

  1. @JagPatel3 says:

    With the onset of state-on-state warfare on the European continent yet again, western countries are hurriedly re-evaluating the risk to their territorial integrity, whilst some have announced plans to increase spending on defence equipment substantially to counter the threat from Russia, and in the longer term, its ideological partner China.

    But finding and committing scarce taxpayer funds to procure even more military equipment in the post-Covid era is, in itself, full of risks which governments around the world have consistently failed to tackle.

    Instead, what is the prospect of procurement risks being transferred by the government’s defence procurement organisation?

    Defence procurement officials at MoD’s procurement organisation at Abbey Wood, Bristol have long harboured a desire to offload defence procurement risks onto just about anyone in sight – to avoid taking the blame for things when they go wrong, such as delays and cost overruns which inevitably come to the fore, again and again. Hitherto, they have tried to palm off such risks onto the private sector, with little success.

    But now there is an alternative.

    The UK government is increasingly moving away its longstanding policy of procuring equipment designed to a bespoke technical specification requirement because it is no longer confident in the ability of its own people at its arms-length procurement organisation to identify, manage and control technical risks inherent in a starting-point for the technical solution that requires development work to be performed upon it – which has been the cause of persistent delays and cost overruns on equipment procurement programmes for as long as anyone can remember.

    Whereas the government has not come out and said so publicly, it has quietly revised its defence procurement policy to consider buying, as its first and foremost priority, new military equipment for the Armed Forces which automatically falls in the off-the-shelf category – specifically, because an off-the-shelf equipment is a fully engineered and supported technical solution which satisfies the key user requirements at no additional cost or risk to the Exchequer, that is to say, it does not require any UK-specific modifications or related development work laden with risk to be performed upon it.

    The problem with relying on the domestic defence industry is that it is not in a position to offer suitable off-the-shelf equipment because it simply hasn’t got any, leaving MoD with no option but use the government-to-government route facilitated by a willing and able country.

    The severe financial crisis at MoD has forced it to adopt a zero-tolerance attitude towards persistent delays and cost overruns on defence procurement programmes which has, in turn, seen it go for off-the-shelf purchases to satisfy its military equipment needs – in the shape of orders for the P-8A Poseidon maritime patrol aircraft, Apache AH-64E attack helicopters, MQ-9B Protector armed drones, E-7 Wedgetail airborne early warning and control aircraft, BOXER armoured vehicles and now H-47(ER) Chinook heavy-lift helicopters whilst the Joint Light Tactical Vehicle has been identified for its Multi Role Vehicle–Protected (MRV-P) requirement – the last four, after having first conducted a comprehensive market survey and then a comparative analysis of existing, in-service platforms. All of this equipment is being sourced from manufacturers of foreign origin.

    In so doing, this government has put financial security and the national interest first, not domestic equipment manufacturers’ commercial interests.

    To its credit, this government has realised that the most important benefit to be derived from buying off-the-shelf equipment is that it allows any hidden technical, financial and schedule risks – which have dogged the so-called, minimal development solutions proposed by domestic equipment manufacturers – to be transferred to the other government. This is especially pertinent given that domestic contractors are unable to tackle such risks because they no longer possess an in-house engineering design & development capability, and haven’t done so for many years.*

    Additionally, it will not be necessary to maintain the usual (overmanned) procurement team, when a skeletal procurement team can easily see each acquisition through – which paves the way for the government to reduce the headcount at MoD Abbey Wood even further, in numbers not possible before, thereby going a long way towards fulfilling its objective of reducing the civil service headcount by 45,000 over the next three years to the pre-pandemic level.
    @JagPatel3

    * Written submission to the Defence Committee, Inquiry into Defence industrial policy – Procurement and prosperity, published 10 September 2019, pp.3-4, PDF file. http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/defence-committee/defence-industrial-policy-procurement-and-prosperity/written/104907.pdf

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